Base rate won’t stop discounts
Banks will not lend below the minimum or base interest rate from July 1 as directed by RBI, but they may continue to give cheaper credit to some preferred clients as per their discretion under existing agreements.
While public sector major State Bank of India (SBI) has made its intentions partly clear in this regard, industry sources said that some of the top private sector banks might do the same.
RBI’s direction on having a base rate — the minimum rate below which banks cannot lend with effect from July 1, was largely aimed at bringing parity between different classes of borrowers and discourage discounted lending by banks to blue-chip companies. However, the banks seem to have found a loop-hole in the whole exercise in the name of loan agreements already signed with their existing clients.
Almost all the banks have announced their respective base rates, being effected from Thursday, which ran-ge between 7-8.75 per cent. This means they would have to lend at a rate equal to or above these base rates.
In the previous regime, the banks’ interest rates were linked to their Benchmark Prime Lending Rates (BPLR) decided by them. In the earlier system, the banks could lend at a rate above the BPLR, and even below that for their preferred customers. But discounted rates are not allowed in base rate regi-me. However, to honour the existing loan agreements, the banks can give the customer an option to continue with the BPLR system till the facility falls for renewal or review. — PTI
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