Multiple choice

Many times we read about the 'Prime Lending rate' charged by the banks. What is the meaning of Prime Lending rate?

  1. The rate at which banks normally give loan to their most favoured customers.
  2. The rate at which banks get money from the RBI.
  3. The rate which is paid normally by the banks on their fixed deposits kept with them for a period of five years or above.

  1. Only 1

  2. Only 2

  3. Only 3

  4. All 1, 2 and 3
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A Correct answer
Explanation

Prime Lending Rate (PLR) is the interest rate at which banks lend to their most creditworthy customers (Statement 1 correct). Statement 2 is incorrect as banks get money from RBI at repo rate, not PLR. Statement 3 is incorrect as PLR is a lending rate, not a deposit rate for fixed deposits. PLR serves as the benchmark for pricing most loans.

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