Loan rates now made transparent | business | Hindustan Times
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Loan rates now made transparent

If you are looking for a home loan, this is the right time to get one. A new system for interest rates will kick in on Thursday, which will be transparent, called the 'base rate' system. Basics of base rate

business Updated: Jun 30, 2010 01:45 IST
HT Correspondent

If you are looking for a home loan, this is the right time to get one.

A new system for interest rates will kick in on Thursday, which will be transparent, called the 'base rate' system.

This will serve as the minimum rate for all loans and will be calculated on the cost of deposits, the banks' administrative and operational costs and statutory costs.

This will also most likely end the practice of offering loans to new customers at lower rates than those prevailing for the first couple of years. This practice is seen as discriminatory against existing customers, whose benefits are actually being passed on to lure and lock in new customers.

The base rate system will replace the existing benchmark prime lending rate that was prone to arbitrariness in charging of interest rates.

Banks will have to provide information on the actual minimum and maximum lending rates charged to major categories of borrowers on a quarterly basis under a formula specified by Reserve Bank of India.