Definition: Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers . Description: Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of funds to their customers.
How is the base rate set? The Monetary Policy Committee (MPC) decides the base rate. The committee meets to discuss it every 6 weeks.
The concept of base rate was introduced on July 1 2010 at all banks across India. Before the base rate system, BPLR (Benchmark Prime Lending Rate) was employed. However, with the implementation of the base rate system, credit pricing became more transparent. Here is an article that explains in-depth about the base rate and other related information, which you might require assistance to understand better.
The base rate is the minimum rate of interest that is set by a country's central bank for lending a loan. This rate is usually taken as the standard interest rate by all the banks operating in that country. Once the base rate is announced by the central bank, no bank is permitted to offer any type of loan to its customers at a rate that is lower than the base rate that has been set by the central bank of a nation.
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How Is Base Rate Calculated?
The calculation of base rate is based on different factors. A few of them are:
- Deposit cost
- Administrative cost
- Unallocated overhead cost
- The amount of profit a bank earns in the last financial year
Note: The current base rate of RBI is 7.25 - 8.80%
Current Base Rate of Banks
The 2022 or current base rate of banks are as follows:
|
| Axis Bank | 8.45% |
| Canara Bank | 8.80% |
| HDFC Bank | 7.45% |
| Dhanlaxmi Bank | 9.80% |
| Andhra Bank/Union Bank | 8.40% |
| SBI (State Bank of India) | 7.55% |
| Bank of Baroda | 8.15% |
| Karnataka Bank | 8.00% |
| IDBI Bank | 9.65% |
| Kotak Mahindra Bank | 7.30% |
| PNB (Punjab National Bank) | 8.50% |
| Union Bank of India | 8.40% |
| Syndicate Bank/Canara Bank | 8.80% |
| Corporation Bank/Union Bank | 8.40% |
| Bank of India | 8.80% |
| Oriental Bank of Commerce/PNB | 8.50% |
| Punjab & Sind Bank | 9.70% |
| Catholic Syrian Bank | 9.35% |
| RBL Bank | 8.50% |
| Bank of Maharashtra | 9.40% |
Reference Bank bazar
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