The full form of BLR is Base Lending Rate or Bank Loan Rating. It is a minimum interest rate that banks charge from their borrowers. It is determined by the bank’s cost of funds, risk factors, and operating expenses. BLR is typically used as a benchmark for setting the interest rates on various types of loans, such as personal loans, mortgages, and car loans.
How is BLR calculated?
BLR is calculated using a formula that takes into account the bank’s cost of funds, risk factors, and operating expenses. The cost of funds is the interest rate that the bank pays to borrow money from other financial institutions. Risk factors include the creditworthiness of the borrower and the type of loan. Operating expenses are the costs associated with running the bank, such as salaries, rent, and technology.
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What is the difference between BLR and other Interest Rates?
BLR is the minimum interest rate that banks can charge their borrowers. However, banks may offer lower interest rates to borrowers with good credit scores or who are borrowing for certain purposes, such as education or homeownership.
Other interest rates that banks use include:
- Prime Lending Rate (PLR): PLR is the interest rate that banks charge their most creditworthy borrowers.
- Marginal Cost of Funds Based Lending Rate (MCLR): MCLR is a new interest rate benchmark that was introduced in India in 2016. It is calculated based on the bank’s marginal cost of funds, which is the cost of raising funds from the market.
- Base Rate (BR): BR is a new interest rate benchmark that was introduced in Malaysia in 2015. It is calculated based on the bank’s cost of funds, risk factors, and operating expenses.
Also Read – What is the Full Form of MSF?
Is BLR still used today?
BLR is still used in some countries, such as Malaysia and India. However, many countries have moved away from using BLR as a benchmark for setting interest rates.
In India, BLR is still used by some banks to set interest rates on loans. However, the government has encouraged banks to move away from using BLR and adopt more transparent and competitive benchmarks, such as the Marginal Cost of Funds Based Lending Rate (MCLR).
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