NEWS & ADVICE : HOME LOANS
As era of base rate nears all await SBI's call
By Joseph Samson
May 10, 2010
Print    Email    RSS   

With the base rate coming into implementation in the next two months, all banks are in move to calculate their base rate which would be replacing the benchmark prime lending rate (BPLR) completely from the loan pricing mechanism of Indian banks. The base rate is coming into play from 1st July 2010.

Most of these banks are however on the track of competitive pricing and thereby would decide their rates on the basis of the rates declared by the country's largest lender, SBI. They do not want to lose in the market to SBI.

"SBI has a market share of 40-45% in the corporate lending market. They can possibly have the lowest base rate and can sweep away competition on pricing," said Abizer Diwanji, head (financial services), KPMG.

Experts say that the other public sector banks would be following the rate set by the banking major and private sector entities would be working on their cost efficiencies in order to compete in the market.

The RBI has in its final guidelines mentioned that the banks can set their own parameters for calculating base rate but once a parameter has been selected it cannot be altered or changed.

"We are more comfortable with the 1-year fixed deposit cost as the yardstick to calculate the base rate," said B A Prabhakar, executive director, Bank of India. The bank has declared that its base rate would be above 8%.

"That will be sensible as usually most of the deposits fall in that tenure," said a senior official of Central Bank of India. "Otherwise it may lead to an asset-liability mismatch," he added.

"Charging different base rates for different tenures is ruled out since the RBI has reasoned that banks lend out of a common pool of money," said a senior official from Indian Banks' Association.

 

 


(Comments Posted : 0) Post Your Comments
Show All Comments
COMPARE QUICKLY
 Select a product:
 

CALCULATE QUICKLY
 Select a product:
 

EDITORS' PICKS
Banking Ombudsman: to the aid of the customer
Know your home loan better
Identify the cheapest home loan offer
Carnival of Indian Personal Finance Blogs #6
Refinancing your home loan: is it a...


PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

NEWS THIS WEEK
Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive