Banks to Pass on MCLR Rate Cuts to Borrowers & Launch External Benchmark Lined Loan Products: FM
Finance Minister Nirmala Sitharaman on Friday said that banks in India have decided to pass on marginal cost of funds based lending rate (MCLR) rate cuts to all borrowers.
 
She also said that banks have decided to launch repo rate or external benchmarking-linked loan products, which will reduce EMIs on housing loan, auto and other retail loans.  
 
 
For reducing harassment and bring greater efficiency, public sector banks (PSBs) are mandated to return loan documents within 15 days after the loan closure, the Minister said.
 
Over the years, banks have not reduced lending rates in tune with policy rates announced by the Reserve Bank of India (RBI). Between February and June 2019, RBI has reduced policy rates by 75 basis points (bps). According to RBI financial markets have fully transmitted the changes in policy rates. The weighted average call money rate (WACR) fell by 78bps, market repo rate by 73bps and 10-year benchmark G-Sec yield by 102bps. But banks, on the other hand, have reduced their interest rates on fresh rupee loans only by 29bps during February-June 2019.
 
And yet, earlier this month, RBI governor Shaktikanta Das, had decided to junk the linking of floating interest rates for retail loans to external benchmark. The central bank now wants to consult stakeholders and review liking of floating interest rates with external benchmark. Speaking to reporters after the monetary policy review, governor Das said that RBI is again having stakeholder consultation on linking floating interest rates for retail loans to external benchmark and is reviewing it.
 
In December 2018, the central bank, then headed by Dr Patel had asked all banks to adopt new external benchmark for providing loans for home, auto and micro and small enterprises (MSME) from 1 April 2019. 
 
 “Our interactions with various stakeholders, including both public sector and private sector banks, indicate that steps are being taken by them on an ongoing basis to progressively lower their interest rates so that the benefits of the policy rate reductions are passed on to the economy. Accordingly, we expect higher transmission of monetary policy actions and stance by the banks in the weeks and months ahead,” Mr Das says. 
 
Before the RBI decision of last December, Moneylife Foundation had filed a public interest litigation (PIL) in the Supreme Court (SC) praying for an external benchmark, among other things. The SC had asked RBI to respond to Moneylife Foundation. Instead of a specific response, RBI had gone ahead and announced the external benchmark.
 
RBI's decision in December 2018 was based on recommendation by Dr Janak Raj Committee. The Committee in its 2017 report "Internal Study Group to Review the Working of the MCLR System" had provided a shocking account of how wide and deep banking malpractices are with regard to floating rate loans. It confirmed every one of our arguments about how banks cheat customers, fudge rates and extort conversion charges.
 
Dr Patel resigned on 10th December and Mr Das took over as new governor of RBI on 12 December 2018. In April this year, Mr Das, who is a former revenue secretary, decided to keep  the issue of linking interest rates to external benchmark on the back-burner, much to the surprise and dismay of borrowers, who have been shortchanged by the banks.
 
Mr Das, in his first monetary policy decision in February 2019, called Dr Patel’s directions as ‘draft guidelines’. In the April monetary policy statement, Mr Das stated that RBI would hold further consultations with stakeholders and work out an effective mechanism for transmission of rates.
 
We have highlighted this issue in several articles and our Cover Story “Banksters” (Moneylife, 28 April-11 May 2017).
 
The external benchmark suggested by RBI in December included its policy repo rate, government of India 91 days treasury bill yield produced by the Financial Benchmarks India Pvt Ltd (FBIL), government of India 182 days treasury bill yield produced by the FBIL, or any other benchmark market interest rate produced by the FBIL.
 
At that time, Moneylife Foundation wrote to Dr Patel, the then governor of RBI, requesting to direct banks to calculate the excess interest they have charged (through arbitrary and ad hoc calculations of base rate or MCLR) and refund the money to borrowers, especially retail borrowers and SMEs. (See Excess Interest Charged by Banks under Base Rate and MCLR Regime) 
 
“The RBI should also direct banks to set up special helplines to handle complaints from borrowers, whom banks have overcharged over the years. We also request the Reserve Bank to immediately issue circular/master directions asking banks and financial institutions to allow existing borrowers to migrate to MCLR or any new system without any conversion fee or any other charges for the switchover,” the memorandum had said.
 
RBI refused to act on it. We then had to file a PIL in the Supreme Court.
 
The PIL filed by Moneylife Foundation sought justice for a huge section of Indian population including the middle class and lower middle class, who are badly affected by such discrimination. The primary respondent was the RBI. Others named were: ministry of consumer affairs, ministry of finance, Indian Banks’ Association (IBA), National Housing Bank (NHB), Banking Code and Standards Bank of India (BCSBI).
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    Haripada bera

    1 year ago

    Yes

    Prakash

    1 year ago

    It is requested to my ,hon'ble FM that bank which lend towards loan on various categories to Individuals are not tie ing it up with cut on interest over bps It is also not been attaching it with instalment ,due to which ,the balance due are unknown to the loanee. SMS of due after instalment are not made .It is not understood why this is not been taken by all the branch ?

    priyanka

    1 year ago

    Expecting banks to follow is like searching for water in a mirage

    OYO to offer complimentary insurance to its guests
    OYO Hotels & Homes on Monday announced a complimentary insurance cover of upto Rs 10,00,000 for its guests at booking price, across OYO properties in India.
     
    The insurance cover has been launched in partnership with ACKO General Insurance, OYO said in a statement.
     
    "The complimentary insurance package offers OYO guests insurance coverage upto Rs 10,00,000 for protection against accidental death (coverage upto Rs 10 lakh), baggage loss (coverage upto Rs 10,000), accidental medical expenses (coverage upto Rs 25,000) amongst other benefits like OPD treatment, etc for the entire duration of their stay in a particular city," it said. 
     
    To begin with, OYO will offer the insurance package to guests staying at OYO Hotels, OYO Home, OYO Townhouse, Collection O, SilverKey, Capital O and Palette Resorts, the company said. The insurance cover will be applicable to bookings made through the OYO App, website, mobile website, direct bookings as well as walk-ins. 
     
    The offering will be extended to other categories and booking channels in the coming days.
     
    On booking an OYO property, customers will be able to view their insurance policy on the booking confirmation page and by logging on to either of the OYO and ACKO websites with their registered mobile numbers, the statement said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • User 

    Big boost for homebuyers, SC nod to financial creditors status
    The Supreme Court on Friday upheld the status of homebuyers as financial creditors as per the amendment in the Insolvency and Bankruptcy Code (IBC).
     
    Builders had moved the top court challenging the financial creditors status given to homebuyers. With this judgement, the court has upheld the government decision to grant homebuyers the status of financial creditors.
     
    The court has also upheld the IBC Amendment with certain safeguards.
     
    Homebuyers to have a say in Committee of Creditors, and they can also initiate insolvency proceedings.
     
    The court has also asked the government to adequately man the Real Estate (Regulation and Development) Act, 2016 (RERA) and National Company Law Tribunal (NCLT), and should file affidavit within three months in connection with it.
     
    The court also said that the IBC provisions should be read harmoniously with RERA. Every application pending before NCLT will be decided on their own merit with respect to this apex court judgement.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone