The Reserve Bank of India (RBI) is likely to come out with clarification over the impact of base rate on loans where the government is providing subsidies.
A delegation, led by Indian Banks?s Association, had met RBI deputy governor Usha Thorat to discuss the issue.
Currently, the government provides interest rate subvention on farm loan, loans given in rupee terms to the exporters and above all, for the corporate loans, which are governed by corporate debt restructuring (CDR).
The bankers had pleaded with RBI that the competitiveness of subsidised sectors should not get affected after the base rate regime begins on July 1.
Thorat assured the banks that the RBI would shortly come out with its clarifications over these issues.
In base rate system, which would replace the existing BPLR (benchmark prime lending rate) system of lending, no lending can be done below the base rate.
The meeting, among others, was attended by the deputy chairman of IBA, MD Mallya, who is also the chairman & managing director of Bank of Baroda.
While the government gives 2% interest rate subvention on farm loans, the subsidy varies between 2% and 2.5% in case of rupee loans for exporters from bank to bank. Even the commerce ministry has advocated for keeping the export credit at 7.5-8% in the base rate regime.
K Ramakrishnan, chief executive, Indian Banks? Association (IBA), who was a part of the delegation, told FE, ?We met RBI officials on the confusions persisting over various issues .The RBI assured us that it will be coming out with its clarification over the issues soon. Also, the RBI was likely to clarify on the issues related to restructured advances that are governed by CDR.??
The bankers want a clear-cut classification over the application of the base rate and the subsidised loans for farmers and exporters.
The bankers also discussed with RBI what should be the way out to publicise the the implementation of base rate.