Banking News: External benchmark for floating-rate loans from Oct
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The Reserve Bank of India on Wednesday made it mandatory for
banks to link all new floating rate personal or retail loans and floating rate
loans to MSMEs to an external benchmark from October 1.
The changes are in line with the RBI's recent stance that
its policy rate changes should quickly result in lowering of lending rates by
banks. Even though the central bank has consistently cut policy rates in the last
few monetary policy reviews, rate transmission process has not been
satisfactory under the current MCLR framework followed by banks. As per the
changes proposed by the RBI, banks would link the identified loans rates to
external benchmarks but the institutions would be free to choose from among the
several benchmarks indicated by the apex bank. The banks would also be free to
choose their spread over the benchmark rate, subject to the condition that the
credit risk premium may undergo changes only when borrowers credit.
assessment undergoes a substantial change. The changes
proposed by the RBI on external benchmark rate comes after the GDP figures
showed last week that the Indian economy grew at a pace slowest in over 6 years
owing to a massive slowdown in private consumption.
Opposing the four MPC members
who voted for a 35 bps cut, external MPC member Chetan Ghate had said that
there has been inadequate monetary transmission given the quantum of past rate
cuts. At its last bi-monthly monetary policy review meeting here earlier last
month, the RBI decided to cut its repo, or short-term lending rate for
commercial banks, by an unprecedented 35 bps to 5.40 percent. The rate cut was
the fourth in succession adding up to a total of 110 bps.
2. Banking News. PSU banks lose on BSE after the merger announcement.
State-run banks on the exchanges traded on a weak note during the early trade on Tuesday after the government announced plans to merge 10 public sector banks into four.
Punjab national bank which will be merged with the oriental bank of commerce and united bank of India, fell over 7 percent the most among the state-sun banks constituting the PSU bank Nifty ends.
Oriental bank of commerce was trading nearly 5 percent lower.
Canara bank was down over 6 percent but syndicate bank was trading nearly 1 percent higher. Both the banks are set to be marged into one.
Union Bank of India fell nearly 6 percent.
it will amalgamate with Andhra bank and corporation bank.
Allahabad bank fell, which is set to merge with, declined over 2 percent, and Allahabad bank fell which it is set to merge with, declined over 2 per cent.
Earlier the government had also announced upfront capital infusion of Rs 70,000 crore into the public sectors banks.
State-run banks on the exchanges traded on a weak note during the early trade on Tuesday after the government announced plans to merge 10 public sector banks into four.
Punjab national bank which will be merged with the oriental bank of commerce and united bank of India, fell over 7 percent the most among the state-sun banks constituting the PSU bank Nifty ends.
Oriental bank of commerce was trading nearly 5 percent lower.
Canara bank was down over 6 percent but syndicate bank was trading nearly 1 percent higher. Both the banks are set to be marged into one.
Union Bank of India fell nearly 6 percent.
it will amalgamate with Andhra bank and corporation bank.
Allahabad bank fell, which is set to merge with, declined over 2 percent, and Allahabad bank fell which it is set to merge with, declined over 2 per cent.
Earlier the government had also announced upfront capital infusion of Rs 70,000 crore into the public sectors banks.
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