To ensure full benefit of rate cut to the borrowers, RBI has asked banks to follow a new & uniform methodology to calculate base rates as per marginal cost of funds from April 1, 2016. The guidelines issued by RBI in this regard will ensure availability of bank credit of interest rates which are fair to the borrower as well as banks.
The guidelines of RBI provides for that all rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 will be priced with reference to marginal cost of funds based lending rate (MCLR) which will be the internal bench mark for such purposes. The key elements of new system are as follows:
1. All new loans to shift to MCLR based pricing from 01.04.2016.
2. Banks should publish at least five MCLR’s over night, one month, three months, six month & one year.
3. Banks can publish MCLR for any other longer maturities, if required.
4. Banks to review & publish MCLR of different maturities every month on a preannounced day.
Banks will have to reset interest rates on the basis of prevailing MCLR rates and borrowers will have a option to choose rates as per maturity period. With this new system, borrowers will be in a position to get benefits of lower rates as and when key rates are reduced by RBI.