The interest below which a bank is not expected to lend its customers is known as

Correct option is B

The correct answer is (b) base rate

The Base Rate is the minimum interest rate set by a bank below which it cannot lend to its customers, except for specific cases like loans to employees or agriculture. It ensures transparency and fairness in lending practices.

Key Points:

What is Base Rate?

• Introduced by the Reserve Bank of India (RBI) in July 2010.
• Replaced the earlier Benchmark Prime Lending Rate (BPLR) system.
• Calculated based on a bank's cost of funds, operating expenses, and profit margins.

Purpose of the Base Rate:

• Prevents unfair pricing practices in lending.
• Ensures banks do not lend at rates lower than their cost of funds.

Applicability:

• Applies to all new loans and renewals.
• Exceptions include loans under government-sponsored schemes.

Additional Information:

• Deposit Rate: The interest rate banks pay on customer deposits.
• Prime Lending Rate (PLR): The rate at which banks lend to their most creditworthy customers; replaced by the Base Rate for most loans.
• Bank Rate: The interest rate at which the RBI lends money to commercial banks without security; influences monetary policy.