A new benchmark for lending ; The new base rate will make lending more transparent, but it is unlikely to change the interest rates for borrowers immediately and will benefit them only in the long term.

From July 1, banks have switched over to the base rate mechanismfor pricing loans. This marks the end of the benchmark prime lendingrate (BPLR) regime, which was particularly disadvantageous to retailborrowers.

While banks were quick to raise rates every time the Reserve Bankof India (RBI) hiked its rates, the reverse did not happen. The baserate, say experts, will give even the existing borrowers the optionto shift to lower rates.

Base rate is the minimum rate at which banks can lend (barringspecified exemptions, such as to export and agricultural sectors).According to the RBI guidelines, it is calculated on the basis ofthe cost of deposits. This will also …