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One of the commendable points in the Reserve Bank of India’s recent monetary policy is its focus on the benchmark prime lending rate (BPLR) and the calculation of interest rates on savings accounts. Interpretation of PLR at the executive levels requires a closer look.

As it is, weaker the borrower, higher the lending rate prescribed. His bargaining power is also too weak. Implicitly, the seeds of default are sown right at that stage.

With lack of transparency, it is but natural that a high degree of discretionary element gets into the decision-making process of rate fixation. Its justification calls for evaluation.

The central bank’s instruction to banks to calculate interest on savings bank accounts on a daily basis, though long overdue, is a right step. It will go a long way in benefiting the common small depositors.

Similarly, the RBI is well advised to undertake an in-depth study on the margin between lending and deposit rates. There is considerable scope for cost-cutting in banking operations.

K. U. Mada Mumbai

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