The Reserve Bank of India has directed banks to set five benchmark rates for different tenure ranging from overnight rates to one year, which will come into effect from April 1, 2016.
The Highlights of the Guideline are :
1. All rupee loans sanctioned and credit limits renewed w.e.f. April 1, 2016 will be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark for such purposes.
2. The MCLR will be a tenor linked internal benchmark.
3. Actual lending rates will be determined by adding the components of spread to the MCLR.
4. Banks will review and publish their MCLR of different maturities every month on a pre-announced date.
5. Banks may specify interest reset dates on their floating rate loans. They will have the option to offer loans with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of MCLR.
Accordingly, the Reserve Bank of India had brought out the draft guidelines on banks adopting marginal cost of funds methodology for calculating Base Rates on September 1, 2015. Based on the feedback received from all stakeholders, as well as extensive discussions held with banks, the final guidelines have now been released.
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