With the base rate nearing implementation, banks are going for a legal check of personal loan documents signed by them in order to prevent any court cases later on.
The country’s leading bankers under the leadership of, State Bank of India talked about the topic in a meeting recently and reached this decision. A decision was taken that banks would follow independent legal opinion and if needed, sign fresh documents in order to ensure that base rate is executed smoothly.
The meeting was attended by senior executives of Bank of Baroda, Bank of India, Union Bank of India and Central Bank of India. About ¾ of the total lending business in India is controlled by the public sector banks.
The base rate system would prevent banks from lending below the base rate which was the case with the former BPLR system of lending. Currently, banks lend to credit worthy clients particularly corporates below the BPLR rate. Interest rates on company are reset every few months. They will be changed once the base rate comes into play.
A banker who attended the meeting said, “It requires a massive change to core banking solutions, which has not been done so far. Given that we are just around three weeks away from rolling out base rate, being ready on the IT front is going to be a big challenge”.