Mumbai, Oct 29: The RBI has given more operational freedom to banks for fixing interest rates on certain categories of loans and advances. The apex bank has decided to allow banks to fix rates on these loans without reference to the banks’ PLR.

“Keeping in view the suggestions received from banks and other market participants, the existing PLR norms have been further reviewed. It has been decided that banks will be given the freedom to charge interest rates without reference to PLR, in respect of loans granted by them for which refinance has been obtained from term lending institutions, on bank lending to intermediary agencies including housing finance intermediate agencies, bill discounting by banks and on advances/overdraft against domestic, non-resident (external) account (NRE) and FCNR(B) deposits,” the RBI credit policy released in Mumbai on Friday said.

“This has been a long-standing demand of the banking sector and the RBI directive will enable banks to go for sub-PLR lending, thereby reducing cost of funds for the borrowers,” banking industry sources said.

In fact, the State Bank of India has already offerred sub-PLR loans to two housing finance intermediaries, Nabard and HDFC.