Banking Exam Question - What is Base Rate in Banks? How to Calculate Base Rate & it's Importance?

Introduction - Base Rate in Banks

Base rate is the minimum rate set by the Reserve Bank below which banks are not allowed to lend to its customers. 

Base rate is chosen so as to upgrade straightforwardness in the credit showcase and guarantee that banks pass on the lower cost of reserve to their clients. Advance evaluating will be finished by including base rate and a reasonable spread contingent upon the credit chance premium.

It is the minimum rate of interest that a bank is used to charged from customers. It is mandated by the government, stipulates that no bank can offer loans at a rate lower than base rate to any of its customers.