Mapping of spreads means effective rates in the base rate system are lower.
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.
Union Bank of India on Thursday slashed its benchmark prime lending rate (BPLR) by 0.50 per cent to 12 per cent per annum, a day after RBI cut key rate by similar percentage points.
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.
The cost of deposits is on the rise, but banks can't raise interest rate on close to 60% of their loan books, points out Tamal Bandyopadhyay.
State Bank of India has fixed its benchmark prime lending rate at 10.25 per cent, 0.25 per cent below the existing PLR, which is 10.5 per cent
ICICI Bank, the second-largest private sector lender and state-owned Indian Bank on Monday raised their lending rates across all tenors in anticipation of a rate hike by the RBI later this week. The rates have been increased across all tenors under the marginal cost of funds-based lending rate (MCLR) system, a move that will make EMIs expensive for those who availed loans benchmarked against the MCLR. Under the revised rates, effective August 1, ICICI Bank's one-year MCLR has increased by 15 basis points or 0.15 per cent to 7.90 per cent, while the overnight MCLR rose to 7.65 per cent, as per information posted on the bank's website.
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.
Shifting to floating rate deposits can work as an anaesthetic gel for some customers, points out Tamal Bandyopadhyay.
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.
Your guess is as good as mine. Unless something changes dramatically, the expectation that loan interest rates will be fixed in a more transparent manner, is likely to take a long time to realise.
What is expected to change is the level of transparency in the retail and corporate lending market with banks expected to announce the rate changes as and when they happen and also display them at their respective websites.
Banks may have kept overall lending rates unchanged despite a rise in policy rates but have started increasing rates on corporate loans in the sub-benchmark prime lending rate (BPLR) segment.
By evaluating their loan rate against the best available every year, borrowers can achieve considerable savings over the entire tenor, suggests Sanjay Kumar Singh.
The increase comes into effect from Monday, a bank official told PTI in Mumbai.
Those who are on the old lending rate regimes and have not moved to MCLR, will be benefited from this reduction.
The Reserve Bank working group, constituted to revisit benchmark prime lending rate (BPLR), is likely to recommend two types of PLRs and may put a ceiling on banks' sub-PLR lending, a source said.
Base rate system set to replace BPLR system for loan rates.
None of the four benchmarks suggested by the RBI is ideal as banks in India create loan assets from their deposits and not borrowing from the regulator or market, says Tamal Bandyopadhyay.
The revised rates will come into effect from April 16.
The new rate now stands at 11.75 per cent as against the earlier 12.25 per cent, the public sector lender said in a filing with the Bombay Stock Exchange.
The base rate, or the minimum lending rate, of the country's second largest private sector bank will become 9.6 per cent from the existing 9.7 per cent, sources said.
Finance Minister Pranab Mukherjee on Wednesday asked banks to cut interest rates and provide cheap credit to industry in order to spur economic activity.
The Reserve Bank has extended the scheme for providing concessional credit to exporters for two more months till June 30, as they are still to fully recover from the demand slowdown overseas.
Banks had approached the Reserve Bank of India for such a clause for all BPLR-linked loans, which would have otherwise forced them to administer two types of benchmarks -- base rate and BPLR -- for many years if a borrower refused to switch to the base rate.
The State Bank of India (SBI) on Wednesday said that it was examining the possibility of another round of reduction in its benchmark prime lending rate (BPLR), while adding that it was offering the cheapest rates across loan categories.
Interest rates are set to fall again with public sector banks today agreeing to lower deposit and lending rates next month.
While inflation dropped to 0.44 per cent for the week ended March 7, the BPLR of the top five Indian banks was in the range of 12.25-16.75 per cent. In the corresponding period last year, inflation was estimated at 7.78 per cent, while lending rates were in the range of 12.25-12.75 per cent. Real interest rate is the difference between WPI-based inflation and the prevailing benchmark prime lending rate.
Following in the footsteps of other public sector banks, Mumbai-based Bank of India (BoI) On Tuesday cut its benchmark prime lending rate (BPLR) by 50 basis points to 12 per cent and there are indications that State Bank of India may lower rates by the end of the month.
Buyers prefer to wait on expectation of better bargains.
With this reduction, the banks BPLR will fall to 12.50 per cent from January 1. The bank has also lowered its deposit rates by 25-100 bps across various maturities. The maximum rate available would be 8.75 per cent for deposits of two years and above.
Bankers are expecting a further fall in interest rates, due to ample liquidity in the banking system.
Public sector Indian Overseas Bank on Monday announced 0.50 per cent hike in benchmark lending rate to 14 per cent with effect from August 16, but spared housing loans up to Rs 30 lakh and education advances from the increase.
Home, auto and other retail loans from SBI and Union Bank of India will cost more, with the two public sector banks on Thursday announcing an identical 0.5 hike in their benchmark prime lending rates to protect margins.
The bank will give 3.25 per cent interest on savings bank deposits with a balance exceeding Rs 100,000. At present, the interest rate is 3.5 per cent.
HDFC Bank has hiked its benchmark prime lending rate (BPLR) by 0.25 per cent to 15.25 per cent with immediate effect.
The final guidelines to link the interest rate to external benchmarks will be issued by the end of this month
Central Bank of India on Wednesday cut the benchmark prime lending rate by 0.5 per cent to 11 per cent and slashed the interest rate for agri and SSI loans, while offering higher returns on savings of senior citizens.
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