brought in to replace the prime lending rate plr system and was aimed primarily at ensuring proper transmission of rate cuts by the rbi to the people particularly to existing borrowers yet the discrimination has continued with banks having found a way to circumvent the ruleseven as base rates often remain unchanged new borrowers are enticed with narrower spread premium over the base rate now the central banks directive insists that banks internal pricing policy must spell out the rationale for and range of the spread in the case of a given category of borrower some industry observers are interpreting this as a measure to protect interests of existing borrowers banks will not be able change the spread over base rate indiscriminately by differentiating between a new borrower and old borrower for the same category of borrowers for example home loan transparency is now being ensured says vn kulkarni chief credit counsellor with abhay credit counselling centre end to borrowers woes home loan borrowers have two chief complaints against their lenders first they are quick to follow suit when rbi hikes policy rates but do not follow suit when there is a rate cut second existing borrowers are often meted out stepmotherly treatment as banks offer lower rates only to new borrowers the aim of the rbis new base rate formula is presumably to resolve these grievances however as the rbi circular states that banks can opt for any other methodology in vogue which is reasonable and transparent not everyone is convinced that the move will yield the desired results even now banks are free to decide the methodology to arrive at their respective base rates only time will tell the actual impact of this process says patel