GK
BANKING AWARENESS AND SEBI
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Bank rate
|
|
|
Base rate
|
|
|
Overnight rate
|
|
|
None of the above
|
Detailed explanation-1: -Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers. Base rate is decided to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. It is also known as prior probabilities.
Detailed explanation-2: -Base rate is defined as the minimum interest rate set by the RBI below which Indian banks are not permitted to lend to their customers. Unless there is a government mandate, the RBI rule specifies that no bank may offer loans at an interest rate lower than the base rate.
Detailed explanation-3: -Accordingly, RBI mandated an internal benchmark – prime lending rate (PLR)-in October 1994. In April 2003, the RBI supplanted PLR with the benchmark PLR (BPLR), which was followed by the base rate in July 2010 and MCLR in April 2016.