With banks extending loans to corporates at sub-prime lending rates, the Reserve Bank of India (RBI) today constituted a working group to assess whether the current system of benchmark prime lending rate (BPLR) is relevant or not.
"In order to review the present BPLR system and suggest changes to make credit pricing more transparent, the policy proposed constitution of a working group on benchmark prime lending rate," the Reserve Bank said in a release.
RBI said the working group would examine the extent of sub-BPLR lending and huge difference in BPLRs of major banks.
BPLR is a rate at which banks lend to their credit-worthy borrowers while sub-PLR is the rate at which banks provide loans to attract bigger clients and blue chip companies.
The panel would also suggest suitable benchmark for floating rate loans in the retail segment and consider any other issue relating to lending rates.
Besides, the group would also review the administered lending rates for small loans up to Rs 2 lakh and would suggest an appropriate loan pricing system based on international best practices.
The working group which will be chaired by RBI executive director Deepak Mohanty, will have representations from the RBI, Indian banks’ association, Banking Codes and Standards Board of India, and public, private and foreign banks.