Thursday, Jul 07, 2022

Money Changers

A new system to calculate loans promises clarity for the consumer

Money Changers Illustration by Sandeep Adhwaryu

What’s The New Base Rate?

  • From April 1, 2010, banks will adopt a transparent cost-based system to set a reference rate for all loans
  • No loan can be priced below the base rate. Banks will add charges for each loan category.
  • This replaces existing BPLR, based on a bank’s perception. Banks’ lending rates were often below BPLR.
  • The BPLR is unresponsive to overall interest rate changes and doesn’t reflect actual costs.


How Will Loan Customers Benefit?

  • Consumers will be able to compare a bank’s minimum loan rate with what they are eventually paying
  • Allows easier shopping around between different banks, breeds competition and fair pricing of products.
  • As a base rate will be responsive to monetary policy, existing loan consumers will benefit from changes
  • The devil lies in the detail. Will banks implement the spirit behind the changes?