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

Loans for medium enterprises must be linked to external benchmarks: RBI

With respect to micro and small enterprises, floating rate loans are already linked with external benchmarks

Topics
Reserve Bank of India | floating rate bonds

Press Trust of India  |  Mumbai 

Reserve Bank of India, RBI

All new floating rate loans given to medium enterprises will be linked with external benchmarks from April 1, according to the

With respect to micro and small enterprises, floating rate loans are already linked with external benchmarks.

In a circular issued on Wednesday, RBI said it has now been decided that all new floating rate loans to the medium enterprises extended by from April 1, 2020, "shall be linked to the external benchmarks".

The move is aimed at further strengthening monetary policy transmission so that benefits of reduction in key lending rate (repo) can be passed on to medium enterprises also, the apex bank said.

Floating rate personal and retail loans have already been linked to external benchmarks. RBI repo rate, treasury bill yields, and other market interest rate published by FBIL (Financial Benchmark India Private Ltd) are among the benchmarks.

According to the RBI, subsequent to the introduction of an external benchmark system, the monetary policy transmission has improved in respect of the sectors where new floating rate loans have been linked to external benchmarks.

Since February 2019, the RBI has reduced the repo rate or short term lending rate by 135 basis points.

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, February 26 2020. 19:54 IST
RECOMMENDED FOR YOU
.