Many PSU banks said they will fix the base rate for personal loans at about 8%. This new system is set to come into effect from 1st July 2010.
SBI chairman OP Bhatt said the base rate of the bank would lie between 7.5% and 8.5% while Punjab National Bank CMD KR Kamath said it would be range about 8-8.5%.
While banks are changing the benchmark rate, the actual rate of interest for current borrowers will remain the same. It will simply be an alteration of the rate structure. Indian Overseas Bank chief SA Bhat said the rate will be 8-9% for his bank. He said, “The cost of deposits of most banks is around 5.75-to-6.75%. So, it is no wonder the base rate would be 8-9% for most banks”.
Canara Bank chief AC Mahajan said the rate will be about 8-8.5%. Union Bank of India chief MV Nair gave a narrower range of 8-8.25%.
However private banks are expected to fix the base rate below their public sector peers. Yes Bank MD & CEO Rana Kapoor said that private banks are expected to fix the base rate comparatively lower.
The base rate guidelines from RBI say that banks have to consider factors like cost of deposits and average return on net worth for base rate computation. Banks can alter the method within 6 months.