Bankers cautious on new benchmark move

It will improve transparency and provide same set of benchmarks for financial sector and real sector

Welcoming the Reserve Bank of India’s (RBI’s) efforts to link market-determined benchmarks to price loans, bankers have said they preferred a gradual migration to new regime to develop aspects such as risk hedging tools to address asset-liability mismatches.

The current system — marginal cost of funds-based lending rate (MCLR) — is not far off from market-determined rates for loans. “While making frequent changes in rates for the asset side, we have to keep in mind the fact that deposits in India are predominantly on fixed rates. That builds rigidity, limiting room to manoeuvre,” said senior bankers across public, private and