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India cenbank announces new rules for how banks can set lending rates
December 17, 2015 / 12:55 PM / in 2 years

India cenbank announces new rules for how banks can set lending rates

MUMBAI, Dec 17 (Reuters) - India’s central bank on Thursday set new rules on how banks can calculate their lending rates, making them more closely based on market rates and removing some of the freedom lenders now enjoy in order to allow quicker transmission of monetary policy.

Under the new rules, banks must set their lending rates under the so-called marginal cost of funding every month, which is based on the cost of new deposits.

Under the current system banks set their lending rates based on the average rate of outstanding deposits, a system that had given them more freedom to determine how much to change.

The Reserve Bank of India (RBI) said the rules, which closely track draft guidelines issued in September, will come into effect starting April 1, 2016.

For statement see: (Reporting by Suvashree Dey Choudhury; Editing by Rafael Nam)

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