ICICI Bank, which is first off the mark in the industry with the new product, will offer four slabs and target bill-discounting and subscriptions to surrogate commercial papers (CPs).

Officials in the bank said that it is offering a rate of 10.5 per cent for advances up to 90 days, 11.5 per cent between 91 and 180 days, 12.5 per cent between 181 and 364 days and 13.5 per cent for 365 days. The bank's standard PLR is also pegged at 13.5 per cent. These rates are exclusive of interest rate tax. The bank is currently offering 7 per cent for deposits maturing between 46-90 days, 8 per cent for deposits maturingbetween 91-179 days, 10 per cent for deposits maturing between 180 days to 364 days and 10.5 per cent for 1-2 year maturities.

On Saturday, the RBI released a circular which said that it has decided to provide banks with freedom to operate different PLRs for different maturities, provided the transparency and uniformity of treatment envisaged are maintained.Bankers said that the pricing of such loans was decided on at 200-250 basis points above the cash reserve ratio (CRR)-adjusted deposit cost. Thus, for loans between 91-179 days the PLR has been fixed at 11.5 per cent while the deposit rate is 8 per cent. Banks are at present required to deposit 10 per cent of their net demand and time liabilities (NDTL) with the RBI in the form of CRR on which they earn 4 per cent interest. ICICI Bank sources said that they will target bill discounting and surrogate commercial paper. "Currently, the RBI bars banks from offering bill discounting at rates below the PLR. Now we can offer bill discounting rates below the PLRof 13.5 per cent," a source in the bank said.

The banks will also target CP issuers which do not carry any rating but are nonetheless rated very high by the internal assessment of the bank to provide funds under this new product.

"At present, under the bill discounting scheme we have lent out Rs 300 crore. We expect this to double with the introduction of the new tenor linked-PLR," the source said.

Bankers said that the move will bring in more flexibility with lendable resources and is the first step towards a revolving underwriting facilty. "For example, if a corporate wants a one-year loan and wants to roll it over after every six months he can do so by just issuing a short-term debt paper. "This system will provide enormous flexiblity to both the borrower as well as the bank," a banker in a private bank said.

Analysts said new private banks and foreign banks are likely to wean away corporates from the fold of public sector banks which will be slow in offering tenor-linked PLR. At present, most ofthe PSU banks have pegged the PLR for working capital loans as well as term loans at the same rate. For instance, the State Bank of India charges 12 per cent PLR on both working capital as well as term loans.