The new rules will make pricing of loans more transparent.
This time, RBI can cut rates to reflect the improved fundamentals and to further shrink the arbitrage window.
Loans at a discount to the benchmark prime lending rates of banks are back with a majority of the fresh loans being disbursed at sub-PLR rates.
The move will to a large extent speed up the monetary transmission process--which is banks passing on the rate cuts that the Reserve Bank announces to their borrowers without much delays--something that has been missing all these while and something that the RBI has been unhappy with.
'If the new rate is lower than your current rate, ask your bank to shift you to it.' 'This can be done by paying a fee of Rs 5,000 to Rs 6,000.'
Some banks provide loans and advances at a rate lower than the BPLR of the bank to customers availing finance for business purposes or short-term funds for various needs.
For instance, an oil marketing company availed of a short-term credit facility of Rs 500 crore (Rs 5 billion) from a public sector bank at less than 7 per cent. Non-banking finance companies, which were finding it difficult to raise resources from banks, can now avail of loans at 10.5-11 per cent as against 14-15 per cent in November.
While most borrowers calculate the gain they stand to make from switching to a lower interest rate, they often fail to take into account all the costs.
10 largecaps stocks which stand to gain from the Budget.
You would find NBFCs more willing to lend even if you have a poor credit score, says Adhil Shetty
In a relief to the incumbent telecom operators, who have more than 6.2 MHz spectrum, the department of telecom (DoT) on Friday clarified the retrospective fee on spectrum beyond 6.2 MHz would be calculated based on the 2001 auction price, indexed to the prime lending rate (PLR) of a state-owned bank.
Foreign brokerage Bank of America Merrill Lynch said they expect the headline inflation to rise to 3.3 per cent in May, but added that it is within the 2-6 per cent range which the government has set for the RBI.
Fundraising through qualified institutional placement (QIP) has revived this year, led by commercial banks, after a lacklustre 2022. According to data compiled by Prime Database, Indian companies have raised Rs 53,070 crore in 2023 so far, of which seven banks - Union Bank of India, Indian Bank, Bank of India, Federal Bank, IDFC First Bank, Bank of Maharashtra, and J&K Bank - account for Rs 21,290 crore, or about 40 per cent. If other financial institutions are included, the figure surges to Rs 26,690 crore.
Under the earlier scheme, borrowers were charged fixed interest rate of 8.5 per cent for Year 2 and Year 3 for loan amount less than Rs 50 lakh (Rs 5 million) and a rate of 9 per cent for first three years for loan amount of greater than Rs 50 lakh. Year 4 onward the interest rate was fixed at PLR minus 2.75 basis points.
Under the earlier scheme, borrowers were charged fixed interest rate of 8.5 per cent for Year 2 and Year 3 for loan amount less than Rs 50 lakh (Rs 5 million) and a rate of 9 per cent for first three years for loan amount of greater than Rs 50 lakh. Year 4 onward the interest rate was fixed at PLR minus 2.75 basis points.
In tune with Prime Minister Atal Bihari Vajpayee's recent promise, the government and Reserve Bank of India are all set to enhance credit flow to the small-scale sector and are likely to ask banks to extend loans at competitive prime lending rates.
India Inc on Wednesday said the Reserve Bank's move to cut interest rate by 0.50 per cent is "pro-growth" and exhorted banks to transmit the lower interest rate to borrowers to revive demand and kick-start the investment cycle.
India's projected growth rate may be marginally affected if there\nis a bad monsoon, as it will affect agricultural output, said Suresh Tendulkar,\nchairman of the prime minister's Economic Advisory Council.
While bankers and experts expect the lending rate to fall by about one percentage point in the near-term, the Prime Minister's Economic Advisory Council has strongly pitched for rate cut by the RBI in its monetary policy review later in the month.
Yet, no bank has been taken to task for its actions, says Harsh Roongta.
RBI will cut rates in its next policy announcement on June 2.
SBI is the first major bank to cut its base lending rate this year.
Buyers prefer to wait on expectation of better bargains.
The committee is considering multiple BPLRs for corporates, SMEs and retail borrowers and is likely to meet by mid-September to finalise the recommendations on the BPLR structure. BPLR is the interest rate that commercial banks charge their most credit-worthy customers.
Citibank India will increase the interest rate on certain loan products, including home loans, due to rise in cost of funds and new risk weight norms.
Students pursuing professional courses can now get loans up to Rs 4 lakh (Rs 400,000) at concessional rates, following a directive from the government that banks should step up education loans.
Interest charged by government lower than bank rates.
Country's second largest public sector lender Punjab National Bank said on Wednesday it might increase prime lending rate in the range of 25 to 50 basis points, but a decision had not been taken.
The Bank of Baroda on Thursday expressed its desire to acquire a bank in south or east India and said it was open to reduce the prime lending rate by 0.25-0.50 per cent.
The ministry of small-scale industries, in consultation with the Reserve Bank of India, was considering reducing prime lending rate (PLR) for the small-scale industry, especially the unorganised sector.
What stood out in his 15-year journey as a member of the political executive at the Centre was his glowing record as India's most successful and effective finance minister. Both as prime minister and finance minister, he understood the importance of gradualism, except when the economy or the polity was in a crisis.
SBI is the first major state-run bank to hike lending rates after short-term rates rose as a result of the Reserve Bank of India's liquidity tightening moves announced in July.
Public sector banks have already begun slashing their prime lending rates while some in the private sector space have so far refrained from doing so. "Private sector banks will (now) have to reduce their rates," Prime Minister's Economic Advisory panel chief Suresh Tendulkar said. "Banks are well-capitalised but the current problem is that they are unwilling to lend."
While the total disbursement of housing loans by PSBs as well as HFCs witnessed a deceleration in 2016-17, there was significant growth for the lower slabs
'It will send a very strong signal that it is now our time to grow.'
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