Interest rate to be based on marginal cost of funds from April 1: RBI

The RBI today said all banks will have to follow a new and uniform methodology from April next year to calculate base rate as per the marginal cost of funds. In a press release issued today The Reserve Bank said that apart from helping borrowers reap the benefit of lower rates, the step will also improve transparency in the methodology followed by banks for determining interest rates on advances. 

It added the guidelines are also expected to ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
As per the final guidelines by the Central bank all rupee loans sanctioned and credit limits renewed w.e.f. April 1, 2016 will be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark for such purposes.

RBI said the MCLR will be a tenor linked internal benchmark and actual lending rates will be determined by adding the components of spread to the MCLR. It also said banks will review and publish their MCLR of different maturities every month on a pre-announced date. It said banks may specify interest reset dates on their floating rate loans.