The Base Rate is the minimum interest rate of a Bank below which it cannot lend, except for DRI advances, loans to bank's own employees and loan to banks' depositors against their own deposits.

The actual lending rates charged to borrowers would be the Base Rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenor premium.

The Base Rate calculations include all those cost elements which can be clearly identified and are common across borrowers. The constituents of the Base Rate includes

• • The card interest rate on retail deposit (deposits below Rs. 15 Lakh) with one year maturity (adjusted for CASA deposits)
• • Adjustment for the negative carry in respect of CRR and SLR
• • Unallocatable overhead cost for banks which would comprise a minimum set of overhead cost elements
• • Average return on net   After factoring in costs incurred while sanctioning a loan, the proposed base rate could be as low as around  8.50% in the current interest rate

No, each bank will arrive at its own base rate

Banks are required to review the base rate at least once every quarter. Banks can review the same even more than once a quarter. After review, the Bank may decide to change or continue the same base rate.