RBI orders banks to link lending rate to external interest rate benchmark

The Reserve Bank of India has made mandatory for banks to link retail and MSME loans to external interest rate benchmarks. This new norm will be effective from 1st of October. Under this norm, banks have to link all of their new loan products, be it personal, housing or auto to an external benchmark rate.

Banks have been allowed to choose any benchmark market interest rate published by the Financial Benchmarks India Private Ltd (FBIL). Banks can choose RBI’s repo rate, government of India’s three-month treasury bill yield published by the FBIL, government’s six-month treasury bill yield published by the FBIL or any other market interest rate published by the FBIL.

Static/Current Takeaways Important For IBPS RRB PO Mains:

  • Governor of RBI: Shaktikant Das; Headquarters: Mumbai; Founded: 1 April 1935, Kolkata.

Source: The Live Mint

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