Wednesday June 30, 2010
Several Public Sector Undertaking banks on Tuesday announced new benchmark base rates of up to 8 per cent, ushering an era of new interest rate regime. The State Bank of India being lowest with 7.5 per cent, for providing loans including commercial and housing.
It is generalized that this is a move that could make a credit cheaper.
Replacing the prime lending rates that ranged between 11 and 14 per cent, other lenders Central Bank of India, Union Bank of India and Punjab National Bank fixed the minimum lending rate (benchmark rate) at 8 per cent. This is a part of shift to new regime from July
1. A small private bank being acquired by ICICI Bank, Bank of Rajasthan, comes out with base rate of eight percent. The other banks
whom are expected to follow suit soon are, HDFC Bank and ICICI Bank.
SBI (State Bank of India) Chairman O P Bhatt after announcing new rate regime said, “… in the consumer loan segment, the impact will be only 25 basis points plus or minus.”
The banks would peg a prudent PLR but would lend below it if the credit rating of the borrower is very good under the present system but the new system would not permit would not permit banks to lend below the base rate.
As per the Reserve Bank of India, the new regime is aimed at preventing creation of non-productive assets and improving transparency. However, the system, will not apply to concessional loans for export, agriculture and other specified sectors.
