Vysya Bank cuts PLR by 200 basis points
Our Banking Bureau
20 May 2002
Bangalore: Vysya Bank has lowered its prime-lending rate (PLR) by 200 basis points with effect from July 2000. The bank has also decided to adopt a risk-based pricing of credit. The bank proposes to keep a maximum spread of 500 basis points over the PLR.
Vysya Bank president V Raghunathan says all borrowers above Rs 10 lakh will be brought under risk-based pricing with effect from July 2000.
The actual rates will be contracted on the basis of the customers credit rating and the nature and structure of their loans. These will be adjusted for the extent of ancillary business brought in by them.
Though the prevalent credit pricing system does assess credit risk, the pricing itself is neither rationally linked to the borrowers credit risk nor the risk perception of the facility, says Raghunathan.
The new pricing mechanism and the lowered PLR will not only lower the overall cost of credit to borrowers, but also rationalise pricing of credit vis--vis risk and ensure an optimal risk-return trade-off for the bank, he says.