Acceding to the demand of bankers, the Reserve Bank of India on Friday deferred the implementation of the Base Rate regime by three months to July 1 and also exempted three categories of loans from the new system.
“Yes, we have allowed that... It (Base Rate) will start from July 1... All concerns of banks (regarding the implementation of the Base Rate model) have been addressed,” RBI Deputy Governor Usha Thorat told reporters here after a meeting with leading bankers.
The apex bank, in a circular last month, had asked banks to adopt the Base Rate model from April 1.
The RBI decided to replace the current benchmark prime lending rate system with the Base Rate to increase transparency in lending as many banks are lending at much lower rates than their benchmark lending rates to new customers.
However, with the Base Rate lending regime, no bank can lend below this rate to anyone.
Significantly, Ms. Thorat indicated that banks were unlikely to be given any exemption on short-term loans (allowing them to lend below the Base Rate to corporate clients) in the Base Rate model, saying “basically, the principles we have articulated (on lending) will remain the same.”
Talking to reporters after the meeting with the RBI, Indian Banks' Association Chairman and Union Bank Chairman M. V. Nair said the Reserve Bank of India had agreed to exempt three categories of loans — staff loans, loans against fixed deposits and loans under the differential rate of interest scheme — from the Base Rate's ambit.
Besides the three categories of loans exempted from the Base Rate ambit, the central bank might also consider exemption of export credit from the Base Rate, Mr. Nair said.