Lending rates to fall after benchmark PLR in Jan: RBI

Talking to reporters on the sidelines of banking conference, Udeshi said that “benchmarking is definitely necessary because we don’t want banks to give sub-PLR rates to borrowers in some sectors and neglect other sectors. As much as 50-60 per cent of sectors are not getting finance at sub-PLR. That is definitely not what RBI wants,” she said.

The new benchmark PLR would be pegged by each bank on the basis of various parameters like cost of funds, operational cost, NPA and profit margin. According to the RBI deputy governor, “benchmark PLR would be introduced from January 1, 2004 and it would ensure that most of the lending of banks would be at that rate.” Udeshi said that benchmark PLR would ensure that there is transparency and borrowers would be able to know the basis on which the interest rate is charged to them.

However, Udeshi clarified that the benchmark PLR would not be applicable to loans taken by individuals, including housing and retail loans as envisaged by the Indian Bank Association (IBA). “IBA has excluded certain category of loans. Any lending to individuals would be excluded from the benchmark PLR,” she added. It would be up to bankers to decide on the rates on retail loans, she said, adding “it could be below the benchmark PLR.”