With the base rate regime nearing implementation, banks are fearing that it might affect their profits. Banks feel that with the implementation of base rate they would be paying more to depositors without receiving a corresponding earning.

"There could be some squeeze on profits for banks for the current fiscal but there is no cause for concern," said T.Y. Prabhu, Oriental Bank CMD.

The main idea behind RBI coming up with base rate was to bring about a more transparent system of loan pricing. Base rate is coming into play from July 1.

While every bank has been given the liberty to decide its own parameters for setting the base rate, RBI has clarified that a parameter once chosen cannot be changed.

T.M. Bhasin, CMD, Indian Bank said, "Though there could be some pressure but it would not affect the bottomline in any manner as we are already looking at increasing other incomes through several channels, such as bancassurance, we will also focus on fee-based income."