What is PLR

Prime lending rate or PLR refers to that interest rate which banks or financial institutions charge from their customers who are at the top end when it comes to creditworthiness. All customers of the bank are not same, while with some customers there is a risk that they might default while with others that risk is minimal. PLR is the lowest interest rate for the loans given by the bank, so customers who are get loans at PLR are considered to be the cream customers of bank because for all others the rate of interest on loans is higher than PLR. For example if PLR rate of SBI is 12 percent for loans than it will charge more than 12 percent from other customers who are at risk of defaulting.

There are many rules and yardsticks in order to qualify for prime lending rates and that is the reason why not many people get loans on PLR rate. In order to understand it better consider a case where you want to join best university of your state for a post graduate course than before applying in that university for a degree you need to have excellent percentage in your graduation, in the same way PLR is given to those companies or individuals have excellent credit history and rating.

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