Base rate calculation guidelines for banks soon, loan may me cheap

New Delhi: RBI will soon come out with a methodology to determine the base rate taking into account marginal cost of funds to ensure effective monetary policy transmission, deputy governor S S Mundra said. The borrower will get benefit directly including home loan, car loan to new customers. Although the old customers will get benefit little late.

RBI has decreased repo rate by 1.25 percent from January yet however banks decreased only 0.60 percent. RBI trouble is due to banks are not giving full advantage of their move to the customer. Base rate is that minimum benchmark below which a bank cannot give loan. “In the meantime, since the rate reduction cycle that commenced in January, less than half of the cumulative policy repo rate reduction of 1.25 basis points has been transmitted by banks. The median base lending rate has declined only by 60 basis points,” RBI said in its fifth bi-monthly monetary policy statement. On strategic debt restructuring (SDR), Mundra said it’s too premature to say that it is not functioning as the window is still open. Under the SDR scheme, banks are allowed to take a majority ownership of troubled firms and find new owners for turning it around. It allows banks to classify NPAs as standard assets during the 18 months. “Banks have been given a window of 18 months. At this point of time, they are putting SDR in cases which are eligible. I think it’s premature to say that banks are unable to find buyers,” he said

 

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