In order to save borrowers from the fluctuations in the interest rates of loans and to lessen the load of equated monthly installments (EMIs), a committee of Reserve Bank of India has said that banks should think about offering loan schemes having repayment period of 30 years.

The central bank also suggested that these loan tenures may have interest reset provisions in intervals of 7-10 years, but, banks should keep in mind the interest of the borrowers and should not violate regulatory norms when deciding the base rate.

The report by K K Vohra's panel says, "The Indian financial system has G-secs ( government securities) up to 30 years and 30-year bonds by banks. Banks could, therefore, make efforts to offer longer-tenor fixed rate loans, say up to 30 years, which would help reduce the EMIs of borrowers." It should be noted that the Vohra panel was formed to study the viability of launching long term fixed interest loan schemes.

The panel also suggests that banks should offer more hybrid loan schemes to borrowers. Hybrid loan products are those which have both fixed and floating interest options with a greater proportion of fixed interest rate.

On the introduction of longer tenure fixed deposits products, the panel says, "Banks should popularise fixed deposit schemes with tenors above five years, as these are eligible for tax exemption. This would to some extent meet the long-term funding requirement of banks."