Commercial banks will be made to extend loans at base rates from next fiscal year, which is expected to benefit consumers and borrowers.

According to Reserve Bank of India Deputy Governor Subir Gokarn, the apex bank is keen on ensuring that banks provide loans on a base rate from April onwards and not on the basis of current benchmark prime lending rate (BPLR) as the latter was not considered a transparent system.

Addressing the conference on Capital markets - growth with governance organised by Associated Chambers of Commerce and Industry of India (Assocham), Dr. Gokarn said that a draft proposal had been circulated to all stakeholders for their opinion on fixed rate with the aim of ensuring that consumers and borrowers gain the best. Under the BPLR arrangement, banks used their negotiating power for extending loans and based on that the rates for lending were decided which meant that for different consumers banks charged different interest rates.

New method mooted

To put an end to this, Dr. Gokarn said the central bank had mooted a new methodology so that extension of loans became a reality on a base rate and no differential on lending rates was assured for different categories of customers.

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