|
RBI sets up rates panel |
 |
The Reserve Bank of India (RBI) has set up a working group to review the current system of loan pricing by banks to improve transmission of monetary signals on to interest rates in the economy.
Indian banks benchmark their lending to prime lending rates, but in the last few years they have begun lending to customers at way below the prime rates. "The system of benchmark prime lending rate (BPLR) has evolved in such a manner that it has lost its relevance as a meaningful reference rate as bulk of loans are advanced below BPLR," the Reserve Bank of India said in a statement.
"Furthermore, this action impedes the smooth transmission of monetary signals and makes the loan pricing system non-transparent," it said.
The RBI’s working group, headed by its the executive director, Deepak Mohanty, will review issues like the concept of benchmark prime lending rates, extent of lending below banks’ prime rates and appropriate loan pricing system based on global best practices.
It will also examine the wide divergence in prime rates across banks and suggest a suitable benchmark for floating rates for retail lending, it said.
|
