MUMBAI: A host of banks on Wednesday fixed their new minimum lending or base rates between 7.75 and 8.25 per cent, while some small players like Dhanalakshmi Bank and DBS pegged it below the rate announced by the market leader SBI.
As many as 11 public sector banks, including Bank of Baroda, Oriental Bank of Commerce and Allahabad Bank have announced their base rates before noon on Wednesday and their rates range from 7.75 to 8.25 per cent. But private sector lenders Dhanalakshmi Bank and DBS Bank India, fixed their rates at 7 per cent, lower than 7.5 per cent fixed by SBI on Tuesday.
The minimum lending rate, or base rate, is what a bank can charge from a customer. The new lending benchmark regime, which will come into play from Thursday, is intended to bring about more transparency in the lending operations of banks. The new rate will replace the existing benchmark prime lending rate that varies between 11 and 13.75 per cent.
Among the major lenders, Bank of Baroda, Oriental Bank of Commerce, Allahabad Bank, Bank of India, Indian Bank and IDBI Bank set their rates at 8 per cent, while Syndicate Bank, Dena Bank and Indian Overseas Bank fixed at 8.25 per cent.
The Tamil Nadu-based private sector lender Karur Vysya Bank rate is the highest so far at 8.5 per cent.
The Mangalore-based Corporation Bank, State Bank of Mysore, State Bank of Bikaner and Jaipur and the Kerala-based Federal Bank have pegged their rates at 7.75 per cent. UCO Bank has fixed it at 8 per cent.
Under the base rate lending mechanism, borrowers will be charged interest rates over the base rate depending on their credit profile, and banks cannot lend below their base rates. The system, however, will not apply to concessional loans for agriculture, export and other specified sectors.
The base rate system will be applicable for all new loans and also existing loans that come up for renewal. Existing loans based on the BPLR system may continue till maturity of the existing contract.
However, existing borrowers have the option to switch over to the base rate system before the renewal or expiry of the existing contract without any charges.
