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INDIAN Bank Base Rate:An Overview

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  • Dash, Debasis Kumar

Abstract

The paper deals about the issues arising out of implementing base rate for Indian banks. With effect from July 1st, 2010, all banks are supposed to lend at base rate or minimum level of interest rate to customers. The net impact of this for retail customer will not be much as cost of funds for banks are not going to change much and cost of funds determine base rate. Big corporates will be biggest losers as they had advantage of getting loans at sub-base rates. Biggest gainers will be small and medium firms who were getting raw deal earlier from banks. Banks may lose market share in short term but there is going to be greater transparency and trickling down of policies made by RBI across banks due to base-rate system. Game theory has been applied to explain the base rate transition scenario in the paper.

Suggested Citation

  • Dash, Debasis Kumar, 2010. "INDIAN Bank Base Rate:An Overview," MPRA Paper 25667, University Library of Munich, Germany, revised 28 Oct 2010.
  • Handle: RePEc:pra:mprapa:25667
    as

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    File URL: https://mpra.ub.uni-muenchen.de/25667/1/MPRA_paper_25667.pdf
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    References listed on IDEAS

    as
    1. International Monetary Fund, 2004. "Interest Rate Volatility and Risk in Indian Banking," IMF Working Papers 04/17, International Monetary Fund.
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    More about this item

    Keywords

    Base Rate; Private Bank; BPLR; Game Theory; Net Income Margin(NIM);

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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