TMI BlogMaster Direction - Reserve Bank of India (Interest Rate on Advances) Directions, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... n banks. 3. Definitions (a) In these Directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below - (i) Advance against own deposit means advance granted against Rupee/FCNR(B) term deposit and deposit stands in the name of: the borrower, either singly or jointly one of the partners of a partnership firm and advance is made to the said firm. the proprietor of a proprietary concern and advance is made to such concern. a ward whose guardian is competent to borrow on behalf of the ward and where the advance is made to the guardian of the ward in such capacity. (ii) Benchmark Prime Lending Rate (BPLR) means internal benchmark rate used to determine the interest rates on advances/loans sanctioned upto June 30, 2010. (iii) Benchmark rate means the reference rate used to determine the interest rates on loans. (iv) External benchmark rate means the reference rate published by an independent benchmark administrator. (v) Fixed rate loan means a loan on which the interest rate is fixed for the entire tenor of the loan. (vi) Floating rate loans means a loan on which interest rate does not remain fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m one commercial bank to another commercial bank, transfer of borrowal accounts of the existing branch to the branch of acquiring bank shall be on mutually agreed terms of contract. Provided that the existing borrowers shall not be put into any disadvantage and the option of continuing with the existing bank or the acquiring bank. (b) The directions contained in section 4(a) above shall also be applicable to Rupee advances granted against FCNR(B) deposits to a third party or out of resources mobilized under the FCNR(B) scheme. 5. Penal Interest Banks shall formulate a Board approved policy for charging penal interest on advances which shall be fair and transparent. The rate of penal interest shall be decided after taking into account incentive to service the debt and due regard to genuine difficulties of customers. Provided that no penal interest shall be charged on advances mentioned in the circular RPCD.Plan.BC.15/04.09.01/2001-02 dated August 17, 2001, as amended from time to time. CHAPTER III BENCHMARK 6. Internal Benchmark (a) Base Rate (i) All rupee loans sanctioned and credit limits renewed after July 1, 2010 shall be priced with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing funds shall be included under this head. It shall be ensured that the costs of providing those services which are separately recovered by way of service charges do not form part of this component. (vi) Tenor premium These costs arise from loan commitments with longer tenor. The change in tenor premium should not be borrower specific or loan class specific. In other words, the tenor premium will be uniform for all types of loans for a given residual tenor. (vii) Since MCLR will be a tenor linked benchmark, banks shall arrive at the MCLR of a particular maturity by adding the corresponding tenor premium to the sum of Marginal cost of funds, Negative carry on account of CRR and Operating costs. (viii) Accordingly, banks shall publish the internal benchmark for the following maturities: overnight MCLR, one-month MCLR, three-month MCLR, six month MCLR, One year MCLR. In addition to the above, banks shall have the option of publishing MCLR of any other longer maturity. (ix) Review of MCLR (a) Banks shall review and publish their Marginal Cost of Funds based Lending Rate (MCLR) of different maturities every month on a pre-announced date with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting the default risk arising from loan sanctioned shall be arrived at based on an appropriate credit risk rating/scoring model and after taking into consideration customer relationship, expected losses, collaterals, etc. (d) The spread charged to an existing borrower shall not be increased except on account of deterioration in the credit risk profile of the customer. Any such decision regarding change in spread on account of change in credit risk profile shall be supported by a full-fledged risk profile review of the customer. Provided that the stipulation contained in sub-section 8(d) above shall not be applicable to loans under consortium / multiple banking arrangements. 9. Reset of interest rates under MCLR system (a) Banks shall, at their option specify interest reset dates on their floating rate loans. Banks will have the option to offer loans with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of MCLR. (b) The Marginal Cost of Funds based Lending Rate (MCLR) prevailing on the day the loan is sanctioned shall be applicable till the next reset date, irrespective of the changes in the benchmark during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest at the rates prescribed under the schemes to the extent refinance is available shall be exempted from being linked to Base rate/MCLR as the benchmark for determining interest rate. Interest rate charged on the part not covered under refinance shall adhere to the Base rate/MCLR guidelines. (d) The following categories of loans shall be priced without being linked to Base rate/MCLR as the benchmark for determining interest rate: (i) Advances to banks depositors against their own deposits. (ii) Advances to banks own employees including retired employees. (iii) Advances granted to the Chief Executive Officer / Whole Time Directors. (iv) Loans linked to a market determined external benchmark. Provided that floating rate loans based on external benchmark sanctioned before April 01, 2016 shall be equal to or above the Base Rate at the time of sanction or renewal. (v) Fixed rate loans granted by banks. However, in case of hybrid loans where the interest rates are partly fixed and partly floating, interest rate on the floating portion shall not be exempted from MCLR guidelines. Provided that fixed rate loans sanctioned before April 01, 2016 shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest payable on each type of short term borrowing will be arrived at using the average rates at which such short term borrowings were raised in the last one month. For eg. Interest on borrowings from RBI under LAF will be the average interest rate at which a bank has borrowed from RBI under LAF during the last one month. b Long term Rupee Borrowings Option 1: Interest payable on each type of long term borrowing will be arrived at using the average rates at which such long term borrowings were raised. Option 2: The appropriate benchmark yield for bank bonds published by FIMMDA for valuation purposes will be used as the proxy rate for calculating marginal cost. c Foreign Currency Borrowings including HO borrowings by foreign banks (other than those forming part of Tier-I capital) Foreign currency borrowings, to the extent deployed for lending in rupees, should be included in computing marginal cost of funds. The all-in-cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form Rates of Interest for Lending under Consortium Arrangement and (b) Penal Interest for Non-compliance with the Discipline 4 DBOD.No.Dir.BC.141/13.07.01-94 07.12.1994 Interest Rates on Advances 5 DBOD.No.Dir.BC.89/13:07:01/95 21.08.1995 Deregulation of Lending Rates - Levy of Interest Tax 6 DBOD.No.BC.99/13.07.01/95 12.09.1995 Withdrawals against Uncleared Effects 7 DBOD.No.Dir.BC.139/13.07.01/96 19.10.1996 Interest Rates on Advances - Prime Lending Rate 8 DBOD.No.Dir.BC.10/13.07.01/97 12.02.1997 Interest Rates on Advances - Prime Lending Rate 9 DBOD.No.Dir.BC.124/13.07.01/97-98 21.10.1997 Interest Rates on Advances 10 DBOD.No. Dir.BC.33/13.03.00/98 29.04.1998 Interest Rates on Advances 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .BC.19/13.07.01/2002-03 19.08.2002 Zero percent Interest Finance Schemes for Consumer Durables 27 DBOD.No.Dir.BC.25/13.03.00/2002-03 19.09.2002 Charging of Interest at Monthly Rests - Agricultural Advances 28 IECD.No.18/04.02.01/2002-03 30.04.2003 Rupee Export Credit Interest Rates 29 DBOD.No.BC.103/13.07.01/2003 30.04.2003 Interest Rates on Advances 30 DBOD.No.Dir.BC.103A/13.03.00/2002-03 30.04.2003 Interest Rates on Advances - Prime Lending Rate and Spreads 31 DBOD.No.Dir.BC.10/13.03.00/2003-04 14.08.2003 Interest Rates on Advances 32 DBOD.No.Dir.BC.38/13.03.00/2003-04 21.10.2003 Interest Rates on Advances - Prime Lending Rate and Spreads 33 DBOD.No.Dir.BC.39/13.03.00/2003-04 21.10.2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase Rate 50 DBOD.No.Dir.BC.81/13.03.00/2010-11 21.02.2011 Guidelines on Base Rate 51 DBOD.Dir.BC.34/13.03.00/2011-12 09.09.2011 Guidelines on Base Rate 52 DBOD.Dir.No.12740/13.07.01/2011-12 24.2.2012 Guidelines on Base Rate 53 Mail Box clarification 10.04.2012 Guidelines on Base Rate 54 Mail Box clarification 27.04.2012 Guidelines on Base Rate 55 Mail Box Clarification 31.12.2012 Guidelines on Base Rate 56 DBOD.Dir.BC.No.47/13.03.00/2013-14 02.09.2013 Base Rate- Revised Guidelines 57 DBOD.Dir.BC. No.106/13.03.00/2013-14 15.04.2014 Differential Rate of Interest for Micro and Small Enterprises (MSEs) 58 Mail Box ..... X X X X Extracts X X X X X X X X Extracts X X X X
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