Bank Lending Channel: The Role and Effectiveness of Benchmark Interest Rates

Abstract

Since the deregulation of Bank interest rates in India, to make the credit pricing more transparent, Banks were asked to declare a reference benchmark rate for lending around which they should normally lend. This article briefs the history of benchmark lending rates of Banks, various methodologies used and its effectiveness in transmitting the monetary policy rate.

Keywords

benchmark lending rate, monetary policy transmission mechanism, base rate, marginal cost
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