Bank Negara Malaysia (BNM) is formulating a new interest rate framework for the measurement of the Base Lending Rate (BLR) next year to further enhance the country's financial system.

Governor Tan Sri Dr Zeti Akhtar Aziz said BNM would issue a consultative paper outlining the new reference rate framework to the industry in early January next year, as it needs to adjust and progress towards better serving the economy.

"Of late, there have been indications that the BLR as a reference rate has become less relevant.

"It has therefore become less meaningful as a basis for the pricing of loans. Retail lending rates on new loans being offered by the industry are at a substantial discount to the BLR," she told reporters after the launch of the Asian Banking School here Wednesday.

Zeti said the BLR is the key element in the financial intermediation process and needs to be improved in term of its efficiency, for the banking industry to continue to meet the ultimate objectives for its existence.