In a bid to make prime lending rate transparent, banks have agreed to introduce a benchmark PLR by end of September 2003.

The benchmark PLR would be fixed taking into account various factors, including actual cost of funds, operating expenses and non-performing assets, banking sources said on Wednesday after a meeting with Reserve Bank of India.

The banks could then use the PLR for fixing the actual rate of interest for borrowers adding other factors such as tenor and risk, they said.

The benchmark PLR will be introduced in place of tenor-linked PLR, which RBI decided to discontinue.

The bankers have also agreed to make their floating rates more transparent, sources said adding, this PLR would also help the banks to fix floating rates on loans.

The meeting, which was chaired by D Anjaneyulu, principal monetary policy advisor of RBI, was attended by bank executive directors and general managers of all public sector banks and few from private sector and foreign banking entities.

The move follows RBI Governor Bimal Jalan's April Credit Policy announcement on the need for a benchmark PLR.