Efforts by banks?to woo existing customers to shift to the base rate regime by offering cheaper rates than the prime lending rates (PLR) has received luke warm response. Banks have hiked their PLRs in the range of 50-75% after the Reserve bank of India hiked its key rates-reverse repo by 50 bps to 4.50% and repo by 25 bps to 5.75 % in its first quarterly review of credit and monetary policy.
Unveiled since July 1, in base rate system, a bank is prohibited to?provide loans below a particular rate ? the basic rate. Effectively, it puts a stop to the large scale sub-PLR lending accounting for almost 60% of the banking system. However, after the beginning of the base rate system, banks are finding ways to shift customers under the PLR system to the new system in order to have uniform lending rates.
Arun Kaul, executive director(ED), Central Bank of India, said the latest round of PLR hikes by the bank was only directed to shift borrowers with PLR to the base rate fold. However, he agreed that there was is not much shifting of the borrowers so far. KR Kamath, chairman and managing director, Punjab National Bank said, ?Though we have hiked our PLR by a 75 basis points, borrowers don?t have to pay any extra if they decide to shift to the base rate system.??
The PNB officials have said the bank hasn?t seen any significant?change of preference of the base rate which is comparatively much cheaper than the PLR which already been hiked. ?Customers are yet to be aware of the advantages of the new system and it may take time to understand it,?? said a senior official of the bank.It is too early to see any trend among the customers? behaviour, said Kamath.