RBI dilutes norms for some loans;SBI base rate likely at 7.75% | mumbai | Hindustan Times
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RBI dilutes norms for some loans;SBI base rate likely at 7.75%

mumbai Updated: Jun 27, 2010 19:32 IST

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Country's largest lender State Bank of India is likely to fix its base rate-the new lending benchmark banks will follow from next month-at around 7.75 per cent after factoring in the clarifications made by Reserve Bank on treatment of concessional loans.

The banking major, whose base rate would set the trend for other banks in the industry, is likely to make an announcement in this regard tomorrow, sources in the know told PTI here.

According to sources, "SBI had sought some clarifications from the RBI on concessional loans when the base rate kicks in. The RBI has now agreed to relax norms for three category of loans," the source told PTI.

The clarifications were sought with regard to certain category of advances, such as crop loans, restructured advances and export-credit while finalising its base rate, sources said.

Early this week, RBI sent a letter to Indian Banks Association (IBA) clarifying that the base rate norms will not affect the operations of the government's interest rate subvention schemes for export and agriculture loans.

The RBI assured that if interest earned by the bank, including subvention falls below the base rate, it will not be treated as violation of norms. Also, the rules will be relaxed for restructured loans, whose interest rates come below the base rate, the RBI said.