Saturday, October 31, 2009

Base rates will help make credit pricing transparent

The base rate system is definitely more transparent than the BPLR system. But there are some non-transparent aspects to the fixation of the base rate, which need to be highlighted.

In simple words the 'base rate' system recommends that the one year retail fixed deposit rate of a bank (after making certain adjustments) be the base rate for that bank and that floating rate loans be pegged with reference to such a base rate. The one year retail FD rate for each bank is easily and publicly available and to that much extent, it adds considerably to transparency.
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