 Mumbai : The country's top bankers will meet the Reserve Bank of India (RBI) Deputy Governor Subir Gokarn on March 6 to press for postponing the implementation of the base-rate regime beyond April - the date proposed by the regulator.
Bank chiefs who spoke to reporters said they wanted the regulator to keep certain products, such as loans against fixed deposits (FDs) and to employees, outside the purview of the base-rate mechanism.
RBI has sought a ban on lending below the base rate. Most public sector banks have estimated their base rate at around 9 per cent on the basis of the present cost of funds. The State Bank of India, however, has said that its new benchmark will be close to 8 per cent. Bankers said they wanted the regulator to defer the implementation of the new regime by three months to July 1, 2010, as some players had discovered technical glitches.
The base rate is proposed to replace the existing benchmark lending rate, which is seen as lacking transparency. While it will be applicable on new loans as well as the old ones that come up for renewal, existing borrowers will have the option to switch to the new system provided they agree to the terms offered by the bank. RBI had in 2009 constituted a committee, headed by Executive Director Deepak Mohanty, to bring more transparency in pricing of loans.
The committee suggested replacing the existing benchmark prime lending rate (BPLR) system by the base-rate mechanism. According to the draft guidelines, the base rate is to be calculated on the basis of the cost of deposits, adjustment for the negative carry in respect of the cash reserve ratio and the statutory liquidity ratio, overhead costs, and profit margin. Though the base rate will be substantially lower than the prevailing BPLR, which ranges from 11.5 per cent to 15.75 per cent, bankers expect their overall yields on advances to rise since one-third lending is below the BPLR.
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