---
title: "Base Rate: Bank Lending Floor Explained | Model Diplomat"
description: "The base rate is the minimum interest rate below which Indian banks cannot lend, introduced by the RBI in July 2010 to replace the opaque BPLR system."
url: "https://modeldiplomat.com/learn/glossary/base-rate-banking"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The base rate is the minimum lending rate set by a commercial bank below which it is not permitted to lend, except for specified exempted categories.
- Why did the RBI replace the base rate with the MCLR in 2016?
- Could banks ever lend below the base rate?
- How does the base rate differ from the repo rate?
- Is the base rate still relevant after the EBLR regime?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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## Timeline

1. 1 July 2010

   It was introduced by the Reserve Bank of India (RBI) through guidelines issued in April 2010, taking effect on , under the powers vested in the central bank…

2. 1 April 2016

   From , the RBI mandated that banks price new floating-rate loans against the Marginal Cost of Funds based Lending Rate (MCLR), which used the marginal rather…

3. 1 October 2019

   Subsequently, from , the RBI required banks to tie new retail and small-business floating-rate loans to an external benchmark such as the repo rate, producin…

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Example

In July 2010, the Reserve Bank of India replaced the Benchmark Prime Lending Rate with the base rate system, with the State Bank of India setting one of the first base rates at 7.5 percent.

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