The Reserve Bank of India, has said a bank will have to respect its fixed rate agreement, even if interest rates increase later on. The clarification has cleared doubts of some banks about launch of fixed rate home loans.
Clients of certain banks were scared that if the lender’s base rate went over the agreed fixed rate, the bank may hike the loan rate quoting RBI directives although the loan was called ‘fixed rate’. The RBI had ruled no loan can be given below the new base rate.
Banks such as Punjab National Bank, State Bank of India and ICICI Bank are giving fixed rate home loans, but customers were scared that they might be levied a higher rate of interest rate if the base rate increases as bank is not permitted to lend below the base rate.
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But RBI has said when contracting a fixed rate loan if the lending rate (as the special scheme) exceeds the base rate, banks need not charge higher rate even if the banks increase their base rate later on.