Bankers say base rate not to impact margins

Bankers do not expect any impact on their earning margins from RBI move to come out with a base rate.

Bankers do not expect any impact on their earning margins from the RBI move to come out with a base rate,the lowest rate below which commercial loans cannot be offered,from the start of the next fiscal.

However,lenders are not sure about the effect of the RBI proposal on interest rates as these rates depend on asset-liability position of individual banks.

“The base rate model would help more scientific bargaining rather than bargaining without any base. This will also ensure that banks can charge their customers according to their risk appetite,” said Punjab National Bank chairman and managing director KR Kamath.

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Kamath also ruled out any impact on credit growth or net interest margins because of the proposed model,saying the new system will offer a level-playing field to everyone and corporates can still bargain for better pricing from banks.

The base rate may vary every quarter because of cost of funds,cash reserve ratio and statutory liquidity ratio. It will become very dynamic and can change on quarterly or even on a monthly basis said Corporation Bank chairman and managing director JM Garg.

The base rate is defined as the lowest rate that the bank charges from any customer. The bank cannot lend below that.

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