RBI had announced the base rate system which will set the interest rates for the bankers to lend their borrowers. Earlier the rate is known as the Prime Lending Rate(PLR) for the banks. Normally the banks can not lend the money below the PLR to avoid any loss or risk. But, banks started offering the loans cheaper than the PLR to lure the customers. This is also called as the Teaser Loan Rates where the actual loan rates will increase in the later period of time. That will put the extra burden on the borrowers.
RBI come up with the new base rate system where banks can lend the loans based on the new rating system. Earlier it announced that the new system will be effective from April 1,2010. After hearing the request from most of the banks to postpone the new system implementation for another few months, recently RBI announced that the new system will be effective from July 1, 2010.
Also RBI had agreed to exempt the three categories of the loans under this system as follows:
- Staffer Loans
- Loans against Fixed Deposits
- Loans under the differential rate of interest scheme
After the implementation of the new system, it is expected to be increase in the interest rates on the various loans. It includes the home loans which currently offer the teaser rates like 8% for first two years and later the new rates will be effective.
Subscribe to our future articles here.