TOPIC BASE RATE SYSTEM OF BANKS

SUBMITTED BY DHANALAKSHMI KAUNDAR T.Y.B.C.B.I (SEMESTER V)

PROJECT GUIDE PROF.GURUNATHAN PILLAI

SUBMITTED TO UNIVERSITY OF MUMBAI RAJASTHANI SAMMELANS Ghanshyamdas Saraf College Affiliated to University of Mumbai ACCREDITED BY NAAC WITH A GRADE & Durgadevi Saraf Junior College (ARTS & COMMERCE) S.V.Road, Malad (W) Mumbai: 400 064 Year: 2011-2012

RAJASTHANI SAMMELANS
Ghanshyamdas Saraf College Affiliated to University of Mumbai ACCREDITED BY NAAC WITH A GRADE & Durgadevi Saraf Junior College (ARTS & COMMERCE) S.V.Road, Malad(W) MUMBAI: 400 064

CERTIFICATE
I Prof.Gurunathan Pillai here by certify that Ms. Dhanalakshmi S Kaundar a student of Ghanshyamdas Saraf College of T.Y.B.C.B.I (Semester V) has completed Project on BASE RATE SYSTEM OF BANKS in the Academic Year 2011-2012. This information submitted is true and Original to the best of my Knowledge. External examiner: Date: Project Co-ordinator: Date: College Seal: Principal:

ACKNOWLEDGEMENT

I take this opportunity to thank the UNIVERSITY OF MUMBAI for giving me a chance to do this project. I express my sincere gratitude to the Principal, course Co-ordinator Mrs. Bhanu Krishnan, Guide Prof. Gurunathan pillai and our librarian and other teachers for their constant support and helping for completing the project. I am also grateful to my friends for giving support in my project. Lastly, I would like to thank each and every person who helped me in completing the project especially MY PARENTS.

DECLARATION

I Miss Dhanalakshmi S Kaundar a student of Ghanshyamdas Saraf College of Arts and Commerce, Malad (W) T.Y.B.C.B.I (Semester V) hereby declare that I have completed project on BASE RATE SYSTEM OF BANKS in the academic Year 2011-2012. This information Submitted is true and original to best of my Knowledge.

Date:

Signature of Student

EXECUTIVE SUMMARY

The treatment's effectiveness is clearer when such base rate information (i.e. "1000 people... out of how many?") is available. I have written earlier in March 2010, about the implementation of the base rate system from 1st July, 2010. This provides more transparency to compare interest rates offered by various banks. Shifting early to the new benchmark would only help to get the benefits earlier. In the new base rate system, if the interest rates fall, banks will have to lower the base rate, which is a function of cost of funds in the market. The real intention of the RBI is to make the banking system much stronger after the global financial crisis. According to the Reserve Bank of India banks are free to fix
the Benchmark Prime Lending Rate (BPLR) with the approval of their respective Boards. Although as per

Reserve Bank of India rules, Banks are free to fix Benchmark Prime Lending Rate (BPLR) for credit limits over Rs.2 lakh with the approval of their respective Boards yet BPLR has to be declared and made uniformly applicable at all the branches.conditions and does not adequately respond to changes in monetary policy. While initiating the move to replace the existing system of BPLR, RBI felt that the existing lending rate system had lost relevance and hindered effective transmission of monetary policy signals.Although, prime rates (read BPLR) of Indian banks ranged between 11 percent and 15.75 percent.Besides.The Reserve Bank of India (RBI) committee on reviewing the benchmark prime lending rate (BPLR) has recommended that the BPLR nomenclature be scrapped and a new benchmark rate known as Base Rate should replace it.

Index
Sr.no 1.1 1.2 2.1 2.2 2.3 2.4 3.1 3.2 3.3 TOPIC CHAPTER 1 Introduction Advantage of base rate CHAPTER 2 Base rate system for banks More flexible base rate system for banks Banks switch to base rate, dump old system Base rate comparison of banks in India CHAPTER 3 BPLR to base rate, Regime to shift impact customers. BPLR vs. Base rate Repo rate, Reverse repo rate, Bank rate, Call rate, CRR, SLR, PLR, Interest rate CHAPTER 4 Home loan Effect of Base rate Affects home loan borrowers CHAPTER 5 Base rate mechanism may not hurt banks profit: Crisil Base rates increase in India by all banks Banks get mixed response on shifting to base rate RBIs base rate guidelines New Base Rate Regime: Impact on SMEs CHAPTER 6 Case study Conclusion Appendix Bibliography 01 04 06 09 11 12 13 16 22 Page no

4.1 4.2 5.1 5.2 5.3 5.4 5.5 6.1 6.2 6.3 6.4

26 30 34 34 36 38 47 49 51 52 53

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6