Friday, March 5, 2010

Base Rate of Interest by Banks

It is interesting to note that RBI has shifted the date of Banks switching to Base Rate of Interest from Benchmark Prime Lending Rate (BPLR) to a new date ie July 01 (instead of April 01, 2010). In an era of automation and networking, it should not be deifficult for the Asset Liability Management Committees (ALCO) of banks to quickly review the existing and new mechanism and effect changes from the beginning of Financial Year 2010-11. It has been a long journey for the Indian Banking System to streamline and reduce the rates of interest (both on deposits and advances) from regulated (pre-reforms) era to now de-regulated mechanism and towards single digit, easily reachable system (for customers). Today, we are also experiencing stiff competition and level playing field in all industries including banks. Customer is asserting day by day thanks to also passing of RTI Act. Economies are recovering fast globally. Finally, I may say better late than never - let RBI issue clear guidelines to all types of banks in India to switch over to new Base Rate System of Interest.

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