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Sep 02, 2015
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Base rates: RBI issues draft norms for marginal cost computation
The Reserve Bank of India (RBI) has issued draft guidelines on the computation of the base rate of banks, based on marginal costs of funds, to be effective from April 1, 2016. Indian Banks' Association (IBA) will finalise the components of the spread over and above the base rate, to ensure uniformity in lending rate calculations. The regulator has asked banks for a clear time frame to adopt the methodology within two months from the issue of the final norms. The components of the spread would include allocable costs, term premium, risk premium reflecting the defaults and the qualitative element of business strategy. The first three components are quantitative; the business strategy would indicate the priority for the product. If the bank wants to expand that portfolio, it would give a discount and may charge more if it wants to exit from that business line, said a senior public sector bank official.
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http://www.business-standard.com
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