What is Base Rate?

The Base Rate meaning is the minimum rate of interest set by the central bank of the country for lending a loan. The base rate is usually used as the standard interest rate by all banks functioning in the country. However, many banks also calculate the interest rate based on their current MCLR Rate. When the base rate is announced by the central bank, no bank is allowed to offer any loan to its customers at a rate lower than the base rate set by the central bank of a nation.

Following is the table containing the current Base Rates of all banks:

The Base Interest Rate is calculated based on different factors and costs incurred during the lending.

Some of the factors that lenders consider when setting the bank Base Rate are mentioned below:

• Deposit costs
• Administrative costs
• A bank’s profitability in the previous financial year
• Unallocated overhead cost

The cost of deposits has the most weight in deciding the new benchmark. Banks have the flexibility to take into account the cost of deposits of any tenure when calculating their base rate.

Base Rate Effect on Corporate Borrowers

Large corporations benefited from rates as low as 3%-6% when the BPLR Rate (Benchmark Prime Lending Rate) system was employed earlier. However, since the implementation of the base lending rate, no bank is permitted to lend at a loan at a rate lower than the base rate. This has led to corporate lending becoming more expensive.

Base Rate Effect on Retail Customers 

The impact of a base prime lending rate on a retail customer depends on specific circumstances. It could increase or decrease by 25 basis points (100 basis points = 1%) compared to the current interest rate they enjoy. However, this fluctuation will not impact any of the existing customers.

You can also check the SBI MCLR Rate Today Online.