Link all new floating-rate home, auto loans to repo from Oct: RBI to banks

The apex bank also said that the interest rate under external benchmark, like repo, should be reset at least once in 3 months

The RBI has made it mandatory for banks to link all new floating-rate loans for housing, auto and MSMEs to external benchmark like repo from October 1, a move aimed at ensuring faster transmission of policy rate cuts to borrowers.

Industry and retail borrowers have been complaining that banks do not pass on the entire RBI's policy rate (repo rate) reduction to them.

In a circular issued on Wednesday, the Reserve Bank of India (RBI) said it has been observed that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current marginal cost