The correct answer is: C. 1.5% over the Bank Rate
The Bank Rate is the interest rate at which the Reserve Bank of India lends money to commercial banks. The Prime Lending Rate is the interest rate at which commercial banks lend money to their most creditworthy customers. The Saving Rate is the interest rate that banks pay on savings accounts.
Securitization companies issue bonds or debentures to raise money. These bonds or debentures are considered to be relatively risky investments, so they must offer a higher interest rate than other types of investments, such as government bonds. The Bank Rate is a good benchmark for the interest rate that securitization companies should offer on their bonds or debentures. By offering an interest rate that is 1.5% over the Bank Rate, securitization companies can attract investors who are looking for a higher return on their investment.
Here is a brief explanation of each option:
- Option A: The Bank Rate is the interest rate at which the Reserve Bank of India lends money to commercial banks. It is the lowest interest rate at which banks can borrow money. Therefore, it is not a good benchmark for the interest rate that securitization companies should offer on their bonds or debentures.
- Option B: The Prime Lending Rate is the interest rate at which commercial banks lend money to their most creditworthy customers. It is a higher interest rate than the Bank Rate. However, it is still not a good benchmark for the interest rate that securitization companies should offer on their bonds or debentures. This is because securitization companies are considered to be riskier borrowers than commercial banks.
- Option C: The interest rate that securitization companies should offer on their bonds or debentures should be at least 1.5% higher than the Bank Rate. This is because securitization companies are considered to be riskier borrowers than commercial banks. Therefore, they must offer a higher interest rate to attract investors.
- Option D: The Saving Rate is the interest rate that banks pay on savings accounts. It is a lower interest rate than the Bank Rate or the Prime Lending Rate. Therefore, it is not a good benchmark for the interest rate that securitization companies should offer on their bonds or debentures.