Home > Banking > Why should you shift from BPLR to base rate?

Why should you shift from BPLR to base rate?

A number of home loan borrowers in India are worried about the effect of base rates (new benchmark lending rates) introduced in the banking system last year on their existing home loans.

A brief on the home loan rates

Prior to July 1, 2010, home loans in India were  linked with a bank’s BPLR (benchmark prime lending rate). Home loans rates where driven by competition and where pegged below BPLR. In order to bring transperancy in the home loan market, the RBI introduced the base rate. Now, each bank has to mandatorily release its base rate and all loans have to be based on the base rate.

While there is difference in the way both base rate and PLR is calculated by banks, base rate effectively is the lowest rate that a bank would charge its customers.

Customers who have availed home loans prior to introduction of the base rate, often wonder if they should shift their home loan from being linked to BPLR to being based on the base rate.

Here’s a nicely penned article by ET Bureau which gives reasons why one should switch to base rate. Read

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Categories: Banking
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