Benchmark Prime Lending Rate is famous with its brief name BPLR . This is most popular financial term which is used in Banking Sector of India. Benchmark prime lending rate is that standard rate of Interest which are charged by Commercial banks When provide loan to reputed customers. Reserve Bank of India (RBI) has given facility to all banks to fix it according to their norms and situations .
Reserve bank of India has given FAQ relating to instructions on banking matters in which it has clearly that Banks are free to fix Benchmark Prime Lending Rate (BPLR) for credit limits over Rs.2 lakh with the approval of their respective Boards. BPLR has to be declared and made uniformly applicable at all the branches. ( See 25th FAQ )
It is also called minimum interest rate on the investment by banks in loan or non treasury security . So , After fixing of BPLR , customer will also bound to pay interest on that rate to that bank .
We can explain it with Simple Example
Suppose , A customer wants to take a Rs 50- lakh home loan from any Indian bank . The interest rate (BPLR ) that the bank provides a Rs 50 lakh loan at is 11.50 per cent and but if he takes loan of Rs 40 lakh it is 10.5 per cent according to Bank's own norms . because there are
large difference between BPLR , so , he is thinking of taking a Rs. 40 lakh loan at 10.5 per
cent from two different banks . Can he gets a loan for the remaining Rs 10 lakh at 10.5 from some other source? No , It is not be possible to get a Rs 10 lakh loan for the same property from a different bank since the property documents would have been given as security to the first loan provider. That customer cannot get two loans for the same property and also customer will also bound to pay 11.50 on Rs. 40 Lakh home loan
BPLR at Different Banks