You are here: Home » Finance » News » Banks
Business Standard

RBI plans to structure loan rates of NBFCs, housing finance companies

Unlike banks, HFCs and NBFCs do not have any 'anchor rate' or a uniform interest rate-determining structure

Topics
RBI | NBFCs | HFCs

Press Trust of India  |  Mumbai 

Reserve bank of India
Reserve bank of India

After mandating to link their new retail loans to an external benchmark, the Reserve Bank is now looking at structuring the interest rate regime for housing companies and shadow bankers, which together control over a fifth of the credit market, for better transmission, according to a source.

Unlike banks, and do not have any 'anchor rate' or a uniform interest rate-determining structure, the source added noting that at present there is no mandate by the for these players to have such rate.

He said the issue of linking of HFCs' and NBFCs' interest rate to an external benchmark was discussed when the central bank was looking at external benchmarks for

"We need to graduate and and are examining the issue of transparency in their lending rates and will have to take it forward. We are studying the issue of how interest rates are being determined by them and is there some order or structure that needs to be brought in," the source said.

He said and do not operate in the same market as do and this aspect needs to be taken into consideration while considering having any anchor rate for these entities.

It can be noted that while NBFCs have been under regulation, till the FY20 budget, HFCs were being regulated by the National Housing Bank.

On September 4, the had mandated all commercial banks to link all their new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark from October 1.

The regulator had asked banks to link these loans either to the or to 3-months or 6-months Treasury Bill yields or any other benchmark interest rate published by the Financial Benchmarks India.

It said banks can offer such external benchmark linked loans to other types of borrowers as well and are to free to decide the spread over the external benchmark.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, September 18 2019. 22:13 IST
RECOMMENDED FOR YOU
.