INTEREST RATES ON BANK LOANS
On interest rates on bank loans was raised in the Rajya Sabha by Shri Narayan Lal Panchariya. Shri Jayant Sinha, the Minister of State in the Ministry of Finance answered the question on 21.07.2015.
Shri Narayan Lal Panchariya had asked whether the Government has given any direction to reduce the rate of interest on bank loans in the country, if so, the names of the banks, which have reduced the rate of interest on the loans. He also asked whether any action is being taken against those banks, which have not reduced their rate of interest.
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Shri Jayant Sinha answered the question with the introduction of Base Rate system since July 1, 2010, after which all rupee lending rates (including advances up to Rs. 2 lakh) have been deregulated. Accordingly, the interest rates on rupee advances are determined by banks with the approval of their respective Boards. In a deregulated environment, banks have complete freedom in deciding their spread, risk premia, term premia and other customer specific charges as considered appropriate on the loans and advances based on their commercial judgement.
Following the reduction in the RBI’s policy rate by 75 basis points in three equal steps on January 15, March 4, and June 2, 2015, out of a total 89 scheduled commercial banks (excluding RRBs), 58 banks (27 PSBs, 14 private sector bank and 17 foreign banks) reduced their base rates (lending rate) in the range of 10-75 basis points so far (up to July7, 2015). He said more details could be found in given in the Annexure.