Loans against fixed deposits, loans to bank’s staff, and restructured loans, which provide borrowers with more time and have lower rates to prevent defaults, can be offered at interest rates lesser than base rate. So this means, the interest rates on the personal loanswill not change.
While permitting these exceptions, RBI has also delayed the date for introduction of the base rate by banks to July 1. Previously, RBI had said the base rate system would come into force from April 1, a deadline, which many banks found tough to meet.
But the apex bank has excluded giving loans to corporates at a rate lesser than the base rate. This decision was taken at a meeting of RBI deputy governors and CEOs of some banks. In the meeting, RBI has also offered banks higher flexibility in computing their base rate.
For a bank, the base rate will be its minimum cost at which it can lend and the risk premium on a loan would be the mark up over the base rate. The base rate, which will replace the prime lending rate (PLR), is aimed at bringing more transparency in loan pricing.
But the main thing is that RBI has also said that while all the new loans should the associated with the base rate, old clients should be offered an option of either switching over to base rate or stick to the old PLR. Consequently, banks will carry on offering both the models for some time.