Indian Banks' Association may soon ask banks to rate the new floating home loans at the same level as old ones. The details of this are being worked out.

At present, there is a dichotomy in interest that old borrowers and new borrowers pay on floating rate loans. Instead of reducing the overall rates and bringing down the overall yield on advances, banks have been reducing rates only for new borrowers by introducing new schemes available only for limited period. As a result, there are cases where new borrowers pay 8.5 percent whereas the existing ones pay 9.5 percent.

With the introduction of uniform rates, both new as well as old borrowers will be benefited.

Compelled by RBI, IBA has decided to introduce a uniform interest rate regime where both old and new customers will be charged equally. The issue was discussed by CEOs of large commercial banks during a recent IBA meeting where RBI Deputy Governor Usha Thorat asked banks to justify the differential in rates offered to new and old customers.

The apex bank apprised the banks of various complaints by borrowers who alleged that floating rates on loans only increased and reduction in rates was only for new borrowers.

"There is clearly a perception that old floating rate borrowers have been let down and something needs to done about it. It's also a question of retaining customer loyalty. The IBA management committee had discussed this issue at length recently and we feel that going forward, there is a need to move towards uniform rates. It is too early to say how the transition to a uniform rate will happen. It is being examined," said MV Nair, chairman of IBA and CMD of Union Bank of India.

The difference in the rates charged to new and old home loan customers vary from bank to bank depending upon the size of the loan. The spreads are wider for big-ticket loans ranging between 50 and 150 basis points. (100 basis points equal to 1 percentage point).