What is the meaning of Base Rate?

Base Rate is the lowest rate which is defined by the Reserve Bank of India for bankers to lend further. Banks cannot lower the rate any further for its customers. The primary aim of the base rate is to increase transparency in the credit market and make sure that the banks are passing the lowest cost of fund to their customers. The pricing of the loan is decided by addition of base rate and a suitable spread as per the credit risk premium.

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