Why the wait for a suitable benchmark to price loans could get longer

The hunt to find a suitable benchmark to price loans continues to be elusive, and the wait could get longer

A quarter of a century after the Reserve Bank of India (RBI) ushered in the prime lending rate (PLR) concept on October 6, 1994, just how banks price their loans continues to be up for debate. The latest is on linking the lending rate to an external benchmark, but just a little over four months after the central bank flagged it off with reference to welding it to retail loans, it has been forced to back-pedal on the same.

Back in December last year, senior bankers had in private expressed their misgivings: “It is good in theory. The rate at