After I decided to buy a home for my parents, I knew I had a lot of work to do. From researching real estate listings, good builders, and perfect locations to choosing a price the most suitable to my budget, I did everything. The next task I had to do was find a source of financing to turn my dream into reality. I visited a bank and there I came across the term PLR. I was confused about PLR full form in banking, so the representative explained it to me properly.
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What is PLR in banking?
PLR full form is Prime Lending Rate. In simple terms, PLR is the rate of interest which the banks or financial institutions provide loans to their customers. It can be said to be the benchmark rate at which loans like home loans, personal loans and business loans are offered to customers. In other words, it is the rate of internal references for financial institutions and banks which offer home loans to customers. This is PLR meaning.
From what the bank representative told me, PLR differs for different customers on the basis of different parameters like the credit history of the customer, their salary, financial stability and many other factors. The PLR rate is determined by the management of the financial institution. So, when we apply for a loan, the bank or financial institution will charge a rate of interest which will be based on the PLR rate along with a certain percentage which is known as ‘spread’.
So, this is PLR full form in banking and meaning in banking.
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Hey,
Before I tell you what a PLR in banking is, let me tell you that loans are given based on some benchmarks to maintain transparency for consumers. The lending measures for every loan, such as a home loan, are taken based on these benchmark rates. These rates differ from bank to bank and from NBFC to NBFC.
Three major rates to keep in mind are the PLR (Prime Lending Rate), the MCLR (Marginal Cost of Funds based Lending Rate), and the Repo rate.
You can read about the MCLR rate and repo rate here:
What is MCLR rate?
What is repo rate?
What is PLR rate:A PLR rate is an internal reference rate set by the NBFC (Non-Banking Finance Corporations) and HFC (Housing Finance Corporations), for setting up the interest rates on floating interest loans. Floating interest rates for a prime lending rate don’t have a fixed time for review and may change when and as the PLR changes. Presently, the PLR rate in our country is calculated as an average of interest rates provided by 5 large banks.
Difference Between PLR, MCLR, and Repo Rate:| PLR | MCLR | Repo Rate |
Followed by HFCs and NBFCs |
Followed by banks |
Followed by Banks |
External rate |
Internal Rate (as per the regulations of RBI) |
External rate |
No fixed time for review and the rate is reset as and when the PLR changes. |
Reviewed monthly and the rate is reset annually. |
Reviewed by RBI every two months and the rate is reset once in three months. |
Internal rate for NBFCs that ain’t monitored by regulatory bodies. |
Regulated by RBI for all banks. |
Standard rate is set for all and is linked to an external benchmark. |
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I hope now you have a complete understanding of PLR in banking.
What is PLR Rate?
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2022-05-09T19:34:46+00:00 2023-08-08T16:51:50+00:00Comment
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