What is BPLR in Home Loan?

Hi Harsha, 

The BPLR full form in Banking, as explained by Barnali, is Benchmark Prime Lending Rate. This is the rate banks charge their most trustworthy customers. I came to know about this from a friend who works in a commercial bank. 

However, banks are allowed to fix the BPLR with the approval of their board. However, this system has failed to be transparent, as banks sometimes offer interest rates that are below BPLR. To control that, Base rates were introduced.

What Is BPLR In Banking?

BPLR was the primary method that was used by banks to set lending rates. The problem with this policy was that a fixed formula was not available to estimate the prime interest rate. 

As a result, the prime rate of interest policy of the RBI was unable to correlate the repo rates with the interest rates of the loans provided by commercial banks. The interest rates required to keep GDP and inflation in check were unaffected by the repo rate.  

BPLR full form is Benchmark Prime Lending Rate. It stands for the benchmark interest rate set by banks in India for lending to their prime customers. I learnt about it from my sister. She told me that it is the minimum interest rate at which banks can lend to their most creditworthy customers. BPLR is an internal reference rate used by banks to determine the interest rates for various loans, including home loans.

What is BPLR in home loan?

In the past, before the introduction of the Marginal Cost of Funds Based Lending Rate (MCLR) system, BPLR was the primary method used by banks to set lending rates. However, since April 2016, the Reserve Bank of India (RBI) has mandated banks to use the MCLR system for determining lending rates. As a result, the relevance and usage of BPLR have diminished significantly.

• Under the MCLR system, banks consider various factors such as their marginal cost of funds, operating costs, and the cost of maintaining cash reserve ratio (CRR) to determine the lending rates. 

• These rates are then linked to the MCLR, which is reviewed periodically by the bank. The MCLR system provides greater transparency and responsiveness to changes in the policy rates set by the RBI.

While BPLR is no longer the primary benchmark for setting interest rates on home loans, some older loans may still be linked to the BPLR. Existing borrowers who have home loans tied to the BPLR should consider exploring the option of switching to the MCLR-based system to take advantage of lower interest rates.

Now that you know hat is BPLR rate, it's important to note that the interest rates on home loans can vary among different banks and are subject to factors such as the borrower's creditworthiness, loan amount, loan tenure, and prevailing market conditions. Therefore, it is advisable to compare the interest rates and terms offered by different banks before finalizing a home loan.

Now you know BPLR full form and much more about it.