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‡ It is the minimum rate of interest that a bank is allowed
to charge from its customers.

‡ Unless mandated by the government, RBI rule

stipulates that no bank can offer loans at a rate lower
than BR to any of its customers.

‡ The Base Rate system will replace the BPLR system

with effect from July 1, 2010.
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‡ BPLR is the interest rate that commercial banks normally charge
their most credit-worthy customers.

‡ As per Reserve Bank of India rules, Banks are free to fix

Benchmark Prime Lending Rate (BPLR) for credit limits over
.2 lakh with the approval of their respective Boards.
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‡ RBI¶s definition of base rate has 4 components
1. cost of deposits
2. negative carry on CRR and SLR
3. overheads cost and,
4. returns on net worth

‡ For example, 
took costs of its 6-month deposits into account

while calculating its BR, which it has fixed at 7.5%.
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‡ This    has many advantages over the older
method of
      .

‡ One advantage is, in the

      , one could
sanction the loan for lower price for the preferred customer or the
corporate bodies and retail customers may have to pay more for
the same type of loans.

‡ In the 
 , there will not be much variance on the
loans.
 

 
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‡ A bank can change its BR every quarter, and also during the
quarter.

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