RBI to link bank's base rate to MCLR,
from Apr 1 for loans,
borrowers on base rate may benefit
The Reserve Bank will link the base rate for loans given by banks to the MCLR starting April 1, 2018 i.e. from the new financial year. The Marginal Cost of Funds based Lending Rates (MCLR) system was introduced on April 1, 2016 to tackle the problems of the Base Rate regime. With the introduction of the MCLR system, it was expected that the existing Base Rate linked loans and other credit exposures would also migrate to MCLR system. However, this has not happened.
"It is observed, however, that a large proportion of bank loans continue to be linked to the Base Rate despite the Reserve Bank highlighting this concern in earlier monetary policy statements. Since MCLR is more sensitive to policy rate signals, it has been decided to harmonize the methodology of determining benchmark rates by linking the Base Rate to the MCLR with effect from April 1, 2018", says an RBI press release here today.
"It is observed, however, that a large proportion of bank loans continue to be linked to the Base Rate despite the Reserve Bank highlighting this concern in earlier monetary policy statements. Since MCLR is more sensitive to policy rate signals, it has been decided to harmonize the methodology of determining benchmark rates by linking the Base Rate to the MCLR with effect from April 1, 2018", says an RBI press release here today.
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