New base rate to be made effective from 1st July
by 8, March, 2010 0 |
Giving in to the banks’ demand, the Reserve Bank of India has delayed the date of implementation of the planned base rate system to 1st July and also removed 3 types of loans from the new model. This means the rates on old home loans will not change till 1st July.
Usha Thorat, RBI Deputy Governor said, “Yes. We have allowed that it (the base rate) will start from July 1. All concerns of banks (regarding the implementation of the base rate model) have been addressed.”
But Thorat said that banks won’t be given any relief on short-term loans (letting them loan below the base rate to corporate clients) in the new model. She said, “Basically, the principles we have articulated (on lending) will remain the same”.
Talking to media after the meeting with the RBI management, Indian Banks’ Association chairman and Union Bank CMD, M V Nair, said that the apex bank has accepted to relieve 3 types of loans from the base rate’s scope.
They include staff loans, loans against fixed deposits and loans under the Differential Rate of Interest scheme. Moreover, the central bank might also think about removing export credit from the base rate, Nair said.
Bank chiefs who met the RBI top management comprised of SBI chairman O P Bhatt, Union Bank CMD M V Nair, Bank of Baroda CMD M D Mallya, Canara Bank CMD A C Mahajan and StanChart India head Neeraj Swaroop, amongst others.
Banks are worried that with the new lending system, corporates will choose other (non-bank) paths for cheaper funding, which will mainly affect the business of small banks.
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