1) Bank rate is defined as the rate of interest charged by The Central Bank of India against loans offered to commercial banks.
2) The current Bank Rate is the same as Marginal Standing Facility Rate (MSF): i.e. 6.25% p.a where as the prime lending rate is 8.10%.
3) So as per rules of RBI, you should take in to account the prime lending rate as guidance rate.
a) you can charge an interest of up to 10.25% per annum plus Taxes, plus costs of currency hedging risks if you are lending to persons
b) you can charge an interest of up to 11.1% per annum plus taxes plus costs of currency hedging risks if you are lending to Companies in India.
4) Please note taxes means Tax Deduction at Source on Interest income accrued to you
5) As per clause 2.1.1 of FED Master Direction No. 6/2015-16, dated January 1, 2016 Borrowing in INR by persons other than companies in India are subject to satisfying the following conditions:
a) Borrowing shall be only on a non-repatriation basis;
b) The amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the lender, maintained with an authorised dealer or an authorised bank in India;
c) Period of loan shall not exceed 3 years;
d) Rate of interest on the loan shall not be more than two per cent above Bank Rate prevailing on the date of availment of loan;
e) Payment of interest and repayment of principal shall be made only to the NRO account of the lender.
6) Costs of currency hedging risks are 6-11% per annum depending on your foreign exchange dealer for a 3 year contract. currency hedging is a risk insurance cover obtained by an entity or person dealing with foreign currencies so as to protect himself from exchange rate fluctuations.
Hope this information is useful.