Banks Told To Declare Maximum, Minimum Rates

The Reserve Bank of India (RBI) has asked banks to reveal the maximum and minimum interest rates they charge.

The RBI had, in its April credit policy, asked banks to make public their maximum and minimum spreads over the prime lending rate (PLR). However few banks had complied to this.

The RBI has also asked banks to furnish the range of interest rates in which large value of business is contracted.

The RBI said, "While submitting information on the maximum and minimum interest rates in this new special quarterly return, banks are advised to ignore extreme values in the interest rates (say, up to 5 per cent of advances on either side). Further, banks are advised to furnish the range of interest rates in which large value of business (say, 60 per cent or more) is contracted." Banks will now have to submit this information every quarter.

 

According to senior bankers, RBI would like to know the band at which banks conduct the maximum of their business.

The RBI had in its April credit policy asked banks to "review the present maximum spreads on over PLR and reduce them wherever they are unreasonably high so that credit may be available to the borrowers at reasonable interest rates. Further banks should also announce the maximum spread over PLR to the public along with the announcement of their PLR".

Banks, especially the private sector and foreign banks, had been wary of making public the spreads they charge over the PLR in the public domain.

Many of the smaller companies are still charged five-six per cent over the PLRs. Also some of the private sector and foreign banks have also been showing a high PLR of around 14-15 per cent even as they give loans to their blue chip clients at around 10 per cent.

Sources indicated that the high PLR and the spreads over it was used by banks so that it could avoid giving loans to those corporates or sectors with which it was not comfortable with.