what is the meaning of primary lending rate?

Question

a complete in formation about it?

Answer 1

The prime rate is the lending interest rate banks charge their most steady, credit-worthy customers [usually large, conservatively financed businesses] whose credit standing is so high that little risk to the lender is involved. Only a small percentage of customers qualify for the prime rate, which tends to be the lowest going interest rate and thus serves as a basis for other, higher risk loans.
The prime rate is the same for almost all major banks. Adjustments to the prime rate are made by banks at the same time; although the prime rate does not adjust on any regular basis. The prime rate is not very volatile index, however it generally rises quickly but declines very slowly.

It is the base rate that banks use in pricing commercial loans to their best and most creditworthy customers. The rate is determined by the Federal Reserve's decision to raise or lower prevailing interest rates for short-term borrowing. Though some banks charge their best customers more and some less than the official prime rate, the rate tends to become standard across the banking industry when a major bank moves its prime up or down. The rate is a key interest rate, since loans to less-creditworthy customers are often tied to the prime rate. For example, a Blue Chip company may borrow at a prime rate of 5%, but a less-well-established small business may borrow from the same bank at prime plus 2, or 7%. Many consumer loans, such as home equity, automobile, mortgage, and credit card loans, are tied to the prime rate. Although the major bank prime rate is the definitive "best rate" reference point, many banks, particularly those in outlying regions, have a two-tier system, whereby smaller companies of top credit standing may borrow at an even lower rate.