Monday, March 15, 2010

RBI DIRECTIVE TO MOVE TO BASE RATE SCHEME

Loans against fixed deposits (FDs) may lose their sheen once banks shift to the proposed Base Rate
scheme for all fresh loans sanctioned by them with effect from April 1. Once the new scheme kicks in, banks will have to determine their actual lending rates on loans and advances with reference to the Base Rate. Currently, commercial banks give loans against FDs at one per cent over the FD rate that is, if a depositor parks his/her money in a two-year FD (at 6.5 per cent interest) with a bank, then he/she can get up to 90% of the deposit amount as loan at 7.5%. Going by the regulator's draft circular that will take effect from April 1, fresh loans cannot be given below the Base Rate, which bankers say could range from 8% to 9.5%, the rates on loans against FDs could edge up.

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