RBI changes new rules for lending rates

Q.  RBI has tweaked the rules for lending rates and stipulated that fixed rate loans of up to how many years will be offered by lenders based on marginal cost of funding?
- Published on 30 Mar 16

a. 2
b. 3
c. 4
d. 5

ANSWER: 3
 
RBI has tweaked upcoming new rules for lending rates. The central bank said on 29th March 2016 the fixed rate loans of close to three years offered by lenders will be linked to the marginal cost of funding. Loans above that tenor should be exempt. Earlier, all fixed rate loans have been exempted from being set based on marginal cost of funding. The change will apply to new rules implemented from April 1, 2016.
  • The new rules force lenders to base lending rates on marginal cost of funds
  • It is not based on average cost of funding
  • New rules will force lenders to adjust lending rates in relation to market rates removing the sector’s discretion in making a decision as to how much to charge for loans.

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