LPR is the abbreviation of Loan Prime Rate, that is, the quoted interest rate in the loan market, and the basis point represents a part of one percent, that is, 0.0 1%. Therefore, if LPR increases by 30 basis points, it means that the loan interest rate is LPR plus 0.3%. For example, if the one-year LPR is 3.85%, then the loan interest rate of LPR plus 30 basis points is 3.85%+0.3%=4. 15%.
It should be noted that the addition of LPR and basis points is not unilaterally decided by banks, but comprehensively determined according to the borrower's credit rating, loan term, market supply and demand relationship and other factors. This mechanism makes the loan interest rate more market-oriented and can better reflect the real capital cost of the market.
Realization function of LPR
LPR is quoted by 18 representative bank, based on the loan interest rate of the best customers, and by adding the operating interest rate in the open market, it also provides an optimal loan interest rate for market reference. At present, there are two types of LPR: 1 year and more than 5 years. Loans of more than 5 years are suitable for LPR of more than 5 years, and loans of other maturities are suitable for LPR of 1 year.
LPR can fully reflect the supply and demand of funds in the credit market. Using LPR for loan pricing can promote the marketization of loan interest rate and improve the transmission efficiency from market interest rate to credit interest rate. For ordinary lenders, the biggest advantage is that they can settle accounts directly at the most favorable interest rate, without accepting various interest rate changes, and for lenders and enterprises, they can reduce the financing cost of enterprises.