Advances / Loan FAQs:

What is the meaning of the word PLR in the lending rate?

Banks are free to fix Prime Lending Rate (PLR) for credit limits over Rs.2 lac with the approval of their respective Boards, which should be the minimum rate charged by them for such credit limits. PLR is to be declared and has to be uniformly made applicable at all branches.

Can banks have multiple PLRs?

Yes. The banks may announce different PLRs for credit limits over Rs. 2 lac for different maturities provided the transparency and uniformity of treatment originally envisaged continues to be maintained. Banks may announce a separate Prime Term Lending Rate (PTLR) for term loans of three years and above. Banks may also prescribe separate PLRs and spreads over PLRs for loan component and cash credit component.

Whether the revised PLR/s will be applicable to the existing advances?

Yes. The banks are required to invariably incorporate following proviso in the loan agreements in the case of all advances, including term loans, enabling banks to charge the applicable interest rate in conformity with the directives issued by RBI or as may be decided by the Bank, except in case of Fixed Rate Loans. "Provided that the interest payable by the borrower shall be subject to the changes in interest rates made by the Bank or the Reserve Bank from time to time."

What should be penal rate of interest?

In the event of default, the banks may charge penal interest in the borrowal accounts. The penal interest is independent of the regular rate of interest.