Question

The minimum interest rate of a bank, below which is not viable to lend is known as

Answer 1

Thanks for the question!

It is definitely a very interesting question to solve and do some brainstorming.

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The minimum interest rate of a bank below which it is not viable to lend is known as Base Rate. It refers to the minimum interest rate of a bank below which the bank is not supposed not lend. Only RBI can allow this to happen in some exceptional cases.

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Hope it helps and solves your query!!

Answer 2

The above mentioned rate refers to the rate which is commonly known as Prime Lending Rate, which is regarded as the BPLR or Benchmark Prime Lending Rate.

This prime lending rate is offered to those credit worthy clients, whose investments deem promising to the banks.

The main objective of the base lending rates was to maintain its was to bring transparency to lending rates. However, with the introduction of Base Rate, BPLR has now lost its significance and is made applicable normally only on the loans which have been sanctioned before the introduction of Base Rate in July 2010.

RBI is a body which doesn't fix the base rate in banks;rather RBI has issued broad guidelines to banks as to how they should arrive at the base rate.

And thus, its up to the banks as to whom they want to offer such rates.