RBI Asks IBA To Work On Benchmark PLR

Mumbai, September 16: | Updated: Sep 17 2003, 05:30am hrs
The Reserve Bank of India (RBI)on Tuesday asked Indian Banks Associtaion (IBA) to work out the benchmark prime lending rate (PLR) for banks. The RBI has also given 15 days time to IBA to come up with a uniform PLR for banks.

In a meeting with select bankers, the RBI underscored the transparency issue and said that bankers should be accountable to their borrowers.

Banks should make the process transparent and should let the borrowers know the process of arriving at the PLR, a source who attended the meeting told FE. The meeting was chaired by RBI deputy governor Rakesh Mohan and was attended by a cross section of bankers.

If the IBA fails to arrive at a benchmark PLR, then the RBI will again try to resolve the issue, the source said. Banks will decide their respective PLRs with a mark up (positive or negative) on the benchmark PLR depending upon their cost of operations.

At present, banks decide the lending rates to different borrowers subject to their PLRs. The plan for an industry wise benchmark PLR was first announced in the April monetary and credit policy of RBI. It was to ensure transparency in banks pricing of their loan products as also to ensure that the PLR truly reflects the actual costs.

Banks are also expect to take a call on their lending rates after the RBI finalises the benchmark PLR. Once thge benchmark PLR is arrived at, we will start the process of deciding on the bank-wise single PLR, another source said.