RBI Governor to meet bank CEOs on Thursday on rate transmission
Earlier this month, the RBI cut the benchmark interest rate by 0.25 per cent to 6.25 per cent. But PSU and private banks have not been passing on the resultant benefits of these rate cuts and in fact passed less than 5 per cent cut to the customers.
The Governor said that the RBI has received a lot of comments on external benchmarks and it was currently examining them. The RBI is mandated to see whether banks are cutting lending rates in line with repo rates.
In fact for this purpose, the RBI will start linking interest rates to external benchmarks replacing the Marginal Cost of Funds based Lending Rate (MCLR). The home loan borrowers have often complained about the opacity of the interest rate fixing mechanism which allows banks not to pass rate cut benefits in lowering home and auto loan rates.
As and when the external benchmark rate changes, it will reflect in the change in interest rate of the loan as well. The RBI had earlier proposed that from April 1, 2019, banks would have to use external benchmarks instead of the present system of internal benchmarks -- Prime Lending Rate, Benchmark Prime Lending Rate, Base Rate and MCLR to ascertain the lending rates.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
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