Bankers, who met the Indian Banks Association here, felt that the extension of April deadline is necessary given the huge task of gathering segment-wise data, which is required to arrive at their respective base-rates.
“The bankers feel that more time is necessary to prepare for migration to the new base rate system. Each bank has to calculate its on base rate. The required data may not be readily available and the whole process is time-consuming,” a top IBA official told PTI here. Early this month, the apex bank had issued draft guidelines to replace the existing benchmark prime lending rate (BPLR) model with base rate with a view to bring in more transparency into bank loans and interest rate regime.
The RBI was apparently not happy with the practice of banks lending at much lower rates than the BPLR to top-rated corporates, while common borrowers still have to borrow at higher rates.
Draft norms
Announcing the guidelines, the RBI had said the new model will come into effect from April 1 and had sought feedback from market participants on these draft norms by February 17. The actual lending rate charged to borrowers would be the base rate plus borrower-specific charges, including product-specific operating cost, credit-risk premium and tenure premium, the RBI said in the draft guidelines.
Once the new system is in place, banks cannot lend below the base rate to any borrower.
Bankers have welcomed the new model, saying this will enable clients to scientifically bargain for better pricing. They also said any impact on credit growth and earnings due to the new model is unlikely as it provides a level playing-field to everyone.
The IBA is likely to formally submit its recommendations, reflecting the views of banks, to the central bank in the next few days.
Press Trust of India