Changes New Rules In January 2018.
The Reserve Bank of India (RBI) on Thursday unveiled new guidelines on how banks can calculate their lending rates in a bid to make them more closely based on market rates and allow quicker transmission of the monetary policy.
According to the RBI, banks will set their lending rates under the marginal cost of funds (deposits) every month, which will be based on the rate offered on new deposits, which would reflect the market rates. Many banks had sharply cut deposit rates recently but their lending rate reduction has failed to match deposit rates.
“While these guidelines will benefit new customers, existing customers will also have an option to shift to the new regime with some conditions. Sufficient time has been given to banks to switch over to the new regime. We have moved closer to international manner of benchmark rates,” SBI chairman Arundhati Bhattacharya said. Under the current system, banks set their lending rates based on the average rate of outstanding deposits, a system that had given them more freedom to determine how much to charge..