September 2003 -

Floating rates

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Once again the central bank has urged all the major banks to follow a constant benchmark as far as the Prime Lending Rate is concerned with respect to the Floating loans by the Banks. This comes at the realisation that a common rate would enable transparent workings of all the Banks concerned. The PLR will be considered in calculating and should be a major factor while determining in the basic cost of funds, operational costs, reserve requirements and the capital adequacy ratio. The members however urged that different rates as far as retail credit or housing credit should be followed (these are the major factors determining credit market of the country). The uniform PLR would help in determining components involved in the Lending Rates, and a better control over the floating loans.


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