RBI/2011-12/53
DBOD.No.Dir.BC. 5 /13.03.00/2011-12
July 1, 2011
Ashadha 10,1933 (Saka)
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir / Madam
Master Circular - Interest Rates on Advances
Please refer to the
Master Circular DBOD.No.Dir.BC.9/13.03.00/2010-11 dated July
1, 2010 consolidating instructions/ guidelines issued to banks till June 30,
2010 on matters relating to Interest Rates on Advances. The Master Circular has
been suitably updated by incorporating instructions issued up to June 30, 2011
and has also been placed on the RBI website ( http://www.rbi.org.in). A copy of
the Master Circular is enclosed.
Yours faithfully
(P.R.Ravi Mohan)
Chief General Manager
Encl: as above
CONTENTS
MASTER CIRCULAR ON INTEREST RATES ON ADVANCES
- Purpose
To consolidate the directives on interest rates on advances issued by Reserve
Bank of India from time to time.
- Classification
A statutory directive issued by the Reserve Bank in exercise of the powers
conferred by the Banking Regulation Act, 1949.
- Previous instructions
This Master Circular consolidates and updates the instructions on the above
subject contained in the circulars listed in Annex 5.
- Application
To all scheduled commercial banks, excluding Regional Rural Banks.
Structure
1. Introduction
2. Guidelines
2.1 General
2.2 Base Rate
2.3 Applicability of Base Rate
2.4.Floating rate of interest on loans
2.5.Levying of penal rates of interest
2.6.Enabling clause in loan agreement
2.7.Withdrawals against uncleared effects
2.8.Loans under consortium arrangement
2.9.Charging of interest at monthly rests
2.10. Zero percent interest finance schemes for consumer durables
2.11. Excessive interest charged by banks
- Introduction
1.1. Reserve Bank of India began prescribing the minimum rate of interest on
advances granted by Scheduled Commercial Banks with effect from October 1, 1960.
Effective March 2, 1968, in place of minimum lending rate, the maximum lending
rate to be charged by banks was introduced, which was rescinded with effect from
January 21, 1970, when the prescription of minimum lending rate was
reintroduced. The ceiling rate on advances to be charged by banks was again
introduced effective March 15, 1976, and banks were also advised, for the first
time, to charge interest on advances at periodic intervals, that is, at
quarterly rests. In the following period, various sector-specific, programme-specific
and purpose-specific interest rates were introduced.
1.2. Given the prevailing structure of lending rates of Scheduled Commercial
Banks, as it had evolved over time, characterised by an excessive proliferation
of rates, in September, 1990, a new structure of lending rates linking interest
rates to the size of loan was prescribed which significantly reduced the
multiplicity and complexity of interest rates. In the case of the Differential
Rate of Interest Scheme under which credit was provided at a rate of 4.0 per
cent per annum, and Export Credit, which was subject to an entirely different
regime of lending rates supplemented by interest rate subsidies, the existing
lending rate structure was continued.
1.3. An objective of financial sector reform has been to ensure that the
financial repression inherent in administered interest rates is removed.
Accordingly, in the context of granting greater functional autonomy to banks,
effective October 18, 1994, it was decided to free the lending rates of
scheduled commercial banks for credit Iimits of over Rs. 2 lakh; for loans up to
Rs. 2 lakh, it was decided that it was necessary to continue to protect these
borrowers by prescribing the lending rates and accordingly it was prescribed
that for loans up to and inclusive of Rs.2 lakh, the lending rates of banks
should not exceed the Benchmark Prime Lending Rate (BPLR) of the respective
banks. For credit limits of over Rs.2 lakh, the prescription of minimum lending
rate was abolished and banks were given the freedom to fix the lending rates for
such credit limits subject to BPLR and spread guidelines. Banks were required to
obtain the approval of their respective Boards for the BPLR, which would be the
reference rate for credit Iimits of over Rs.2 lakh. Each bank's BPLR has to be
declared and be made uniformly applicable at all branches.
1.4 The BPLR system, introduced in 2003, fell short of its original objective of
bringing transparency to lending rates. This was mainly because under the BPLR
system, banks could lend below BPLR. For the same reason, it was also difficult
to assess the transmission of policy rates of the Reserve Bank to lending rates
of banks. Accordingly, based on the recommendations of the Working Group on
Benchmark Prime Lending Rate which submitted its report in October 2009, banks
have been advised to switch over to the system of Base Rate with effect from
July 1, 2010. The Base Rate system is aimed at enhancing transparency in lending
rates of banks and enabling better assessment of transmission of monetary
policy.
- Guidelines
2.1 General
2.1.1. Banks should charge interest on loans / advances / cash credits /
overdrafts or any other financial accommodation granted / provided / renewed by
them or discount usance bills in accordance with the directives on interest
rates on advances issued by Reserve Bank of India from time to time.
2.1.2. The interest at the specified rates should be charged at monthly rests
(subject to the conditions laid down in paragraph 2.9) and rounded off to the
nearest rupee.
2.1.3. The schedule of rates of interest as per the current directive in force
is given in Annex 1.
2.2 Base Rate
2.2.1 The Base Rate system, as detailed below and in Annex 1 has replaced the
BPLR system with effect from July 1, 2010. For loans sanctioned up to June 30,
2010, BPLR will be applicable, as given in Annex 3 and 4. However, for those
loans sanctioned up to June 30, 2010 which come up for renewal from July 1, 2010
onwards, Base Rate would be applicable. Base Rate shall include all those
elements of the lending rates that are common across all categories of
borrowers. Banks may choose any benchmark to arrive at the Base Rate for a
specific tenor that may be disclosed transparently. An illustration for
computing the Base Rate is set out in Annex 2. Banks are free to use any other
methodology, as considered appropriate, provided it is consistent and is
made available for supervisory review/scrutiny, as and when required.
2.2.2 Banks may determine their actual lending rates on loans and advances with
reference to the Base Rate and by including such other customer specific charges
as considered appropriate.
2.2.3 In order to give banks some time to stabilize the system of Base Rate
calculation, banks were permitted to change the benchmark and methodology any
time during the initial six month period, i.e. end-December 2010. This period
was extended by a further period of six months i.e. upto June 30, 2011.
2.2.4 The actual lending rates charged should be transparent and consistent and
be made available for supervisory review/scrutiny, as and when required.
2.2.5 There can be only one Base Rate for each bank. Banks have the freedom to
choose any benchmark to arrive at a single Base Rate which should be disclosed
transparently.
2.2.6 Even after introduction of the Base Rate system, banks would have the
freedom to offer all categories of loans on fixed or floating rates. Where loans
are offered on fixed rate basis, notwithstanding the quarterly review of the
Base Rate, the rate of interest on fixed rate loans will continue to remain the
same subject to the condition that such fixed rate should not be below the Base
Rate at the time of sanction. However, if the base rate is revised upward
thereafter and in the process the fixed rate falls below the new base rate, it
would not be construed as a violation of the guidelines on Base Rate.
2.3 Applicability of Base Rate
2.3.1 With effect from July 1, 2010, all categories of loans should be priced
only with reference to the Base Rate.
2.3.1.1 However, the following categories of loans could be priced
without
reference to the Base Rate: (a) DRI advances (b) loans to banks’ own employees
(c) loans to banks’ depositors against their own deposits.
2.3.1.2 In those cases where subvention is available to borrowers, it is
clarified as under:
- Interest Rate Subvention on Crop Loans
- In case of crop loans up to Rupees three lakh, for which subvention is
available, banks should charge farmers the interest rates as stipulated by the
Government. If the yield to the bank (after including subvention) is lower than
the Base Rate, such lending will not be construed to be a violation of the Base
Rate guidelines.
- As regards the rebate provided for prompt repayment, since it does not change
the yield to the banks [mentioned at (a) above] on such loans, it would not be a
factor in reckoning compliance with the Base Rate guidelines.
- Interest Rate Subvention on Export Credit
It has already been clarified, vide our circular DBOD.Dir.(Exp).BC.No.102/
04.02.001/ 2009-10 dated May 6, 2010 that interest rates applicable for all
tenors of rupee export credit advances will be at or above the Base Rate. In
cases where subvention is available in terms of our Circular DBOD.Dir.(Exp.).BC.No.94/04.02.001/2009-10
dated April 23, 2010, banks will have to reduce the interest rate chargeable to
exporters as per Base Rate system by the amount of subvention available. If, as
a consequence, the interest rate charged to exporters goes below the Base Rate,
such lending will not be construed to be a violation of the Base Rate
guidelines.
2.3.1.3 Restructured Loans
In case of Restructured loans if some of the WCTL, FITL, etc. need to be granted
below the Base Rate for the purposes of viability and there are recompense etc.
clauses, such lending will not be construed to be a violation of the Base Rate
guidelines.
2.3.1.4 Financing of Off-Grid and
Decentralized Solar applications
Government of India, Ministry of New and Renewable Energy(MNRE) has formulated a
scheme on financing of Off-Grid and Decentralised Solar (Photovoltaic and
Thermal) applications as part of the Jawaharlal Nehru National Solar
Mission(JNNSM). Under the scheme, banks may extend subsidized loans to
entrepreneurs at interest rates not exceeding five percent, where refinance of
two percent from Government of India is available. Such lending at interest
rates not exceeding five percent per annum where refinance of Government of
India is available, would not be considered a violation of our Base Rate
Guidelines.
2.3.2 Changes in the Base Rate shall be applicable in respect of all existing
loans linked to the Base Rate, in a transparent and non-discriminatory manner.
2.3.3 Since the Base Rate will be the minimum rate for all loans, banks are not
permitted to resort to any lending below the Base Rate. Accordingly, the current
stipulation of BPLR as the ceiling rate for loans up to Rs. 2 lakh stands
withdrawn. It is expected that the above deregulation of lending rate will
increase the credit flow to small borrowers at reasonable rate and direct bank
finance will provide effective competition to other forms of high cost credit.
2.3.4 Banks are required to review the Base Rate at least once in a quarter with
the approval of the Board or the Asset Liability Management Committees (ALCOs)
as per the bank’s practice. Since transparency in the pricing of lending
products has been a key objective, banks are required to exhibit the information
on their Base Rate at all branches and also on their websites. Changes in the
Base Rate should also be conveyed to the general public from time to time
through appropriate channels. Banks are required to provide information on the
actual minimum and maximum lending rates to the Reserve Bank on a quarterly
basis, as hitherto.
2.3.5 The Base Rate system would be applicable for all new loans and for those
old loans that come up for renewal. Existing loans based on the BPLR system may
run till their maturity. In case existing borrowers want to switch to the new
system, before expiry of the existing contracts, an option may be given to them,
on mutually agreed terms. Banks, however, should not charge any fee for such
switch-over.
2.3.6 Interest rates under the BPLR system are applicable to all existing loans
sanctioned up to June 30, 2010. However, wherever loans sanctioned up to June
30, 2010 come up for renewal from July 1, 2010, the Base Rate system would be
applicable. The guidelines on Benchmark Prime Lending Rate (BPLR) and Spreads
and its determination for existing loans sanctioned up to June 30, 2010 are
given in Annex 3 and Annex 4.
2.4 Floating Rate of Interest on Loans
2.4.1. Banks have the freedom to offer all categories of loans on fixed or
floating rates, subject to conformity to their Asset-Liability Management (ALM)
guidelines. The methodology of computing the floating rates should be objective,
transparent and mutually acceptable to counter parties. The Base Rate could also
serve as the reference benchmark rate for floating rate loan products, apart
from external market benchmark rates. The floating interest rate based on
external benchmarks should, however, be equal to or above the Base Rate at the
time of sanction or renewal. This methodology should be adopted for all new
loans. In the case of existing loans of longer / fixed tenure, banks should
reset the floating rates according to the above method at the time of review or
renewal of loan accounts, after obtaining the consent of the concerned
borrower/s.
2.5. Levying of penal rates of interest
Banks are permitted to formulate a transparent policy for charging penal
interest with the approval of their Board of Directors. However, in the case of
loans to borrowers under priority sector, no penal interest should be charged
for loans up to Rs.25,000. Penal interest can be levied for reasons such as
default in repayment, non-submission of financial statements, etc. However, the
policy on penal interest should be governed by well-accepted principles of
transparency, fairness, incentive to service the debt and due regard to genuine
difficulties of customers.
2.6. Enabling clause in loan agreement
2.6.1. Banks should invariably incorporate the following proviso in the loan
agreements in the case of all advances, including term loans, thereby enabling
banks to charge the applicable interest rate in conformity with the directives
issued by RBI from time to time.
';Provided that the interest payable by the borrower shall be subject to the
changes in interest rates made by the Reserve Bank from time to time.';
2.6.2. Since banks are bound by the Reserve Bank's directives on interest rates
on loans and advances, which are issued under Sections 21 and 35A of the Banking
Regulation Act, 1949, banks are obliged to give effect to any revision of
interest rates whether upwards or downwards, on all the existing advances from
the date that the directives / revised interest rate come into force, unless the
directives specifically provide otherwise.
2.7. Withdrawals against uncleared effects
2.7.1. Where withdrawals are allowed against cheques sent for clearing, i.e.
uncleared effects (e.g. uncleared local or outstation cheques) which are in the
nature of unsecured advances, banks should charge interest on such drawals as
per the directive on interest rates on advances.
2.7.2. As a measure of customer service, the above instruction will not apply to
the facility afforded to depositors for immediate credits in respect of cheques
sent for collection.
2.8. Loans under consortium arrangement
Banks need not charge a uniform rate of interest even under a consortium
arrangement. Each member bank should charge rate of interest on the portion of
the credit limits extended by it to the borrower, subject to the condition that
such rate of interest is determined with reference to its Base Rate.
2.9. Charging of interest at monthly rests
2.9.1. Banks were required to switch-over to the system of charging interest at
monthly rests with effect from April 1, 2002. While switching over to the new
system, banks were required to ensure that the effective rate does not go up
merely on account of the switch-over to the system of charging / compounding
interest at monthly rests and increase the burden on the borrowers.
Illustratively
If a bank is charging in a borrower’s account an interest rate of 12 percent
with quarterly rests, the effective rate is 12.55 percent. If the bank charges
in the same account an interest rate of 12 percent at monthly rests, the
effective rate comes to 12.68 percent. Banks should, therefore, adjust the 12
percent interest rate charged to the borrower in such a way that the effective
interest rate to the borrower does not exceed 12.55 percent, as hitherto. Thus,
in the above example, banks should charge interest at 11.88 percent (and not 12
percent). If this is done, the effective rate, even after compounding at monthly
rests will be 12.55 percent.
2.9.2. Interest at monthly rests shall be applied in case of all new and
existing term loans and other loans of longer / fixed tenor. In the case of
existing loans of longer / fixed tenor, banks shall move over to application of
interest at monthly rests at the time of review of terms and conditions or
renewal of such loan accounts, or after obtaining consent from the borrower.
2.9.3. Instructions on charging interest at monthly rests shall not be
applicable to agricultural advances and banks shall continue to follow the
existing practice of charging / compounding of interest on agricultural advances
linked to crop seasons. As indicated in circular RPCD.No.PLFS.BC.129/
05.02.27/97-98 dated June 29, 1998, banks should charge interest on agricultural
advances for long duration crops at annual rests. As regards other agricultural
advances in respect of short duration crop and allied agricultural activities
such as dairy, fishery, piggery, poultry, bee-keeping, etc., banks should take
into consideration due dates fixed on the basis of fluidity with borrowers and
harvesting / marketing season while charging interest and compounding the same
if the loan / installment becomes overdue. Further, banks should ensure that the
total interest debited to an account should not exceed the principal amount in
respect of short term advances granted to small and marginal farmers.
2.10. Zero percent Interest Finance Schemes for Consumer Durables
Banks should refrain from offering low / zero percent interest rates on consumer
durable advances to borrowers through adjustment of discount available from
manufacturers / dealers of consumer goods, since such loan schemes lack
transparency in operations and distort pricing mechanism of loan products. These
products do not also give a clear picture to the customers regarding the
applicable interest rates. Banks should, also, not promote such schemes by
releasing advertisement in different newspapers and media indicating that they
are promoting / financing consumers under such schemes. They should also refrain
from linking their names in any form / manner with any incentive-based
advertisement where clarity regarding interest rate is absent.
2.11. Excessive interest charged by banks
2.11.1 Though interest rates have been deregulated, charging of interest beyond
a certain level is seen to be usurious and can neither be sustainable nor be
conforming to normal banking practice. Boards of banks have, therefore, been
advised to lay out appropriate internal principles and procedures so that
usurious interest, including processing and other charges, are not levied by
them on loans and advances. In laying down such principles and procedures in
respect of small value loans, particularly, personal loans and such other loans
of similar nature, banks should take into account, inter-alia, the following
broad guidelines:
- An appropriate prior-approval process should be prescribed for sanctioning
such loans, which should take into account, among others, the cash flows of the
prospective borrower.
- Interest rates charged by banks, inter-alia, should incorporate risk premium
as considered reasonable and justified having regard to the internal rating of
the borrower. Further, in considering the question of risk, the presence or
absence of security and the value thereof should be taken into account.
- The total cost to the borrower, including interest and all other charges
levied on a loan, should be justifiable having regard to the total cost incurred
by the bank in extending the loan, which is sought to be defrayed and the extent
of return that could be reasonably expected from the transaction.
- An appropriate ceiling should be fixed on the interest, including processing
and other charges that are levied on such loans, which should be suitably publicised.
ANNEX 1
Interest Rate Structure for all Rupee Advances including Term Loans of
Commercial Banks from July 1, 2010 [paragraph 2.1.3]
- All categories of loans will henceforth be priced only with reference to the
Base Rate with effect from July 1, 2010. However, the following categories of
loans could be priced without reference to the Base Rate:
- DRI advances
- loans to banks’ own employees
- loans to banks’ depositors against their own deposits.
- The Base Rate will be the minimum rate for all loans [except the exempted
categories listed at 1.(a), (b) and (c) above] and banks will not be permitted
to resort to any lending below the Base Rate.
- A. In those cases where subvention is available to borrowers, it is clarified
as under:
- Interest Rate Subvention on Crop Loans
- In case of crop loans up to Rupees three lakh, for which subvention is
available, banks should charge farmers the interest rates as stipulated by the
Government. If the yield to the bank (after including subvention) is lower than
the Base Rate, such lending will not be construed to be a violation of the Base
Rate guidelines.
- As regards the rebate provided for prompt repayment, since it does not change
the yield to the banks [mentioned at (a) above] on such loans, it would not be a
factor in reckoning compliance with the Base Rate guidelines.
- Interest Rate Subvention on Export Credit
It has already been clarified, vide our circular DBOD.Dir.(Exp).BC.No.102/04.02.001/
2009-10 dated May 6, 2010 that interest rates applicable for all tenors of rupee
export credit advances will be at or above the Base Rate. In cases where
subvention is available in terms of our Circular DBOD.Dir.(Exp.).BC.No.94/04.02.001/2009-10
dated April 23, 2010, banks will have to reduce the interest rate chargeable to
exporters as per Base Rate system by the amount of subvention available. If, as
a consequence, the interest rate charged to exporters goes below the Base Rate,
such lending will not be construed to be a violation of the Base Rate
guidelines.
- Restructured Loans
In case of Restructured loans if some of the WCTL, FITL, etc. need to be granted
below the Base Rate for the purposes of viability and there are recompense etc.
clauses, such lending will not be construed to be a violation of the Base Rate
guidelines.
- Financing of Off-Grid and Decentralised Solar applications
Government of India, Ministry of New and Renewable Energy(MNRE) has formulated a
scheme on financing of Off-Grid and Decentralised Solar (Photovoltaic and
Thermal) applications as part of the Jawaharlal Nehru National Solar
Mission(JNNSM). Under the scheme, banks may extend subsidized loans to
entrepreneurs at interest rates not exceeding five percent, where refinance of
two percent from Government of India is available. Such lending at interest
rates not exceeding five percent per annum, where refinance of Government of
India is available, would not be considered to be a violation of our Base Rate
Guidelines.
- There can be only one Base Rate for each bank. Banks have the freedom to
choose any benchmark to arrive at a single Base Rate which should be disclosed
transparently.
- Even after introduction of the Base Rate system, banks would have the freedom
to offer all categories of loans on fixed or floating rates. Where loans are
offered on fixed rate basis, notwithstanding the quarterly review of the Base
Rate, the rate of interest on fixed rate loans will continue to remain the same
subject to the condition that such fixed rate should not be below the Base Rate.
- Wherever loans sanctioned prior to June 30, 2010 come up for renewal from
July 1, 2010, the Base Rate system would be applicable.
ANNEX 3
Guidelines on Benchmark Prime Lending Rate (BPLR) applicable to loans sanctioned
upto June 30, 2010 ( Paragraph 2.2.1)
With effect from October 18, 1994, RBI has deregulated the interest rates on
advances above Rs.2 lakh and the rates of interest on such advances are
determined by the banks themselves subject to BPLR and Spread guidelines. For
credit limits up to Rs.2 lakh, banks should charge interest not exceeding their
BPLR. Keeping in view the international practice and to provide operational
flexibility to commercial banks in deciding their lending rates, banks can offer
loans at below BPLR to exporters or other creditworthy borrowers, including
public enterprises, on the basis of a transparent and objective policy approved
by their respective Boards. Banks will continue to declare the maximum spread of
interest rates over BPLR.
Given the prevailing credit market in India and the need to continue with
concessionality for small borrowers, the practice of treating BPLR as the
ceiling for loans up to Rs. 2 lakh will continue.
Banks are free to determine the rates of interest without reference to BPLR and
regardless of the size in respect of loans for purchase of consumer durables,
loans to individuals against shares and debentures / bonds, other non-priority
sector personal loans, etc. as per details given below.
BPLR will be made uniformly applicable at all branches of a bank.
Determination of Benchmark Prime Lending Rate (BPLR)
In order to enhance transparency in banks’ pricing of their loan products as
also to ensure that the BPLR truly reflects the actual costs, banks should be
guided by the following considerations while determining their Benchmark PLR:
Banks should take into account their (i) actual cost of funds, (ii) operating
expenses and (iii) a minimum margin to cover regulatory requirement of
provisioning / capital charge and profit margin, while arriving at the benchmark
PLR. Banks should announce a Benchmark PLR with the approval of their Boards.
The Benchmark PLR will be the ceiling rate for credit limit up to Rs.2 lakh.
All other lending rates can be determined with reference to the Benchmark PLR
arrived at as above by taking into account term premia and / or risk premia.
Detailed guidelines on operational aspects of Benchmark PLR have been issued by
IBA on November 25, 2003.
In the interest of customer protection and to have greater degree of
transparency in regard to actual interest rates charged to borrowers, banks
should continue to provide information on maximum and minimum interest rates
charged together with the Benchmark PLR.
Freedom to fix Lending Rates
Banks are free to determine the rates of interest without reference to BPLR and
regardless of the size in respect of the following loans:
- Loans for purchase of consumer durables;
- Loans to individuals against shares and debentures / bonds;
- Other non-priority sector personal loans including credit card dues;
- Advances / overdrafts against domestic / NRE / FCNR (B) deposits with the
bank, provided that the deposit/s stands / stand either in the name(s) of the
borrower himself / borrowers themselves, or in the names of the borrower jointly
with another person;
- Finance granted to intermediary agencies including housing finance
intermediary agencies (list as given below) for on-lending to ultimate
beneficiaries and agencies providing input support.;
- Discounting of Bills;
- Loans / Advances / Cash Credit / Overdrafts against commodities subject to
Selective Credit Control;
- To a co-operative bank or to any other banking institution;
- To its own employees;
- Loans covered by refinance schemes of term lending institutions.
An Illustrative list of Intermediary Agencies
- State sponsored organisations for on-lending to weaker sections. Weaker
sections include –
- Small and marginal farmers with landholdings of 5 acres and less, and
landless labourers, tenant farmers and share-croppers;
- Artisans, village and cottage industries where individual credit
requirements do not exceed Rs. 50,000/-;
- Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY);
- Scheduled Castes and Scheduled Tribes;
- Beneficiaries of Differential Rate of Interest (DRI) scheme;
- Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
- Beneficiaries under scheme of Liberation and Rehabilitation of Scavengers
(SLRS);
- Advances to Self-Help Groups (SHGs);
- Loans to distressed poor to repay their debt to informal sector, against
appropriate collateral or group security;
Loans granted under (i) to (viii) above to persons from minority communities as
may be notified by Government of India from time to time.
In states, where one of the minority communities notified is, in fact, in
majority, item (ix) will cover only the other notified minorities. These
States/Union Territories are Jammu and Kashmir, Punjab, Sikkim, Mizoram,
Nagaland and Lakshadweep.
- Distributors of agricultural inputs / implements.
- State Financial Corporations (SFCs) / State Industrial Development
Corporations (SIDCs) to the extent they provide credit to weaker sections.
- National Small Industries Corporation (NSIC).
- Khadi and Village Industries Commission (KVIC).
- Agencies involved in assisting the decentralised sector.
- State sponsored organisations for on-lending to the weaker sections.
- Housing and Urban Development Corporation Ltd. (HUDCO).
- Housing Finance Companies approved by National Housing Bank (NHB) for
refinance.
- State sponsored organisations for SCs / STs (for purchase and supply of
inputs to and / or marketing of output of the beneficiaries of these
organisations).
- Micro Finance Institutions / Non-Government Organisations (NGOs) on-lending
to SHGs.
ANNEX 4
Interest Rate Structure for all Rupee Advances
including Term Loans of Commercial Banks sanctioned up to June 30, 2010
[paragraph 2.2.1]
Rate of Interest (Per cent per annum)
1. |
(a) |
Up to and inclusive of Rs.2 lakh |
Not exceeding Benchmark Prime Lending Rate (BPLR) |
|
(b) |
Over Rs.2 lakh |
Banks are free to determine rates of interest subject to BPLR and spread
guidelines. Banks may, however, offer loans at below BPLR to exporters or other
creditworthy borrowers including public enterprises based on a transparent and
objective policy approved by their Boards. |
- Export Credit up to June 30, 2010
Interest Rates effective from May 1, 2010 to June 30, 2010 will be not exceeding
BPLR minus 2.5 percentage points per annum for the following categories of
Export Credit:
|
Categories of Export Credit |
1. |
Pre-shipment Credit (from the date of advance) |
|
(a) |
Up to 270 days |
|
(b) |
Against incentives receivable from Government covered by ECGC Guarantee up
to 90 days |
2. |
Post-shipment Credit (from the date of advance) |
|
(a) |
On demand bills for transit period (as specified by FEDAI) |
|
(b) |
Usance bills (for total period comprising usance period of export bills,
transit period as specified by FEDAI, and grace period, wherever applicable) |
|
(i) |
Up to 180 days |
|
(ii) |
Up to 365 days for exporters under the Gold Card Scheme. |
|
(c) |
Against incentives receivable from Govt. (covered by ECGC Guarantee) up to
90 days |
|
(d) |
Against undrawn balances (up to 90 days) |
|
(e) |
Against retention money (for supplies portion only) payable within one year
from the date of shipment (up to 90 days) |
BPLR: Benchmark Prime Lending Rate |
Note: |
|
1. |
Since these are ceiling rates, banks would be free to charge any rate below
the ceiling rates. |
|
2. |
Interest rates for the above-mentioned categories of export credit beyond the
tenors as prescribed above are deregulated and banks are free to decide the rate
of interest, keeping in view the BPLR and spread guidelines. |
3. |
Education Loan Scheme up to June 30, 2010
|
|
Up to Rs. 4 lakh |
Not exceeding BPLR |
|
Above R. 4 lakh |
BPLR + 1% |
Note. |
1. |
The interest to be debited quarterly/ half yearly on simple basis during the
Repayment holiday/ Moratorium period. |
|
|
2. |
Penal interest @2% be charged for loans above Rs. 2 lakh for the overdue
amount and overdue period. |
4. |
Banks are free to determine the rates of interest without reference to BPLR and
regardless of the size in respect of the following loans up to June 30, 2010: |
|
i) |
Loans for purchase of consumer durables |
|
ii) |
Loans to individuals against shares and debentures / bonds |
|
iii) |
Other non-priority sector personal loans including credit card dues |
|
iv) |
Advances / overdrafts against domestic / NRE / FCNR (B) deposits with the bank,
provided that the deposit/s stands / stand either in the name(s) of the borrower
himself / borrowers themselves, or in the names of the borrower jointly with
another person |
|
v) |
Finance granted to intermediary agencies (excluding those of housing) for
on-lending to ultimate beneficiaries and agencies providing input support. |
|
vi) |
Finance granted to housing finance intermediary agencies for on-lending to
ultimate beneficiaries. |
|
vii) |
Discounting of Bills |
|
viii) |
Loans / Advances / Cash Credit / Overdrafts against commodities subject to
Selective Credit Control. |
|
ix) |
To a cooperative bank or to any other banking institution |
|
x) |
To its own employees |
5. |
Loans covered by participation in refinancing schemes of term lending
institutions up to June 30, 2010 |
|
Free to charge interest rates as per stipulations of the refinancing agencies
without reference to BPLR |
6. |
DRI Advances |
4.0% |
Note: |
Intermediary agencies are indicated in
Annex 3 |
ANNEX 5
List of circulars consolidated in the
Master Circular on 'Interest Rates on Advances'
1. |
RPCD No. BC. 29/PS.22-84 |
16.03.1984 |
2. |
DBOD.No.Dir.BC.90/C.347/85 |
02.08.1985 |
3. |
DBOD.No.Dir.BC.38/C.96-86 |
24.03 1986 |
4. |
DBOD.No.Dir.BC.88/C.96-89 |
08.03.1989 |
5. |
DBOD.No.Dir.BC.18 & 19/C.96-90 |
21.09.1990 |
6. |
DBOD.No.Dir.BC.36/C.347-90 |
22.10.1990 |
7. |
DBOD.No.Dir.BC.92/C.96-91 |
06.03.1991 |
8. |
IECD.No.19/08.13.09/93-94 |
28.10.1993 |
9. |
DBOD.No.Dir.BC.115/13.07.01/94 |
17.10.1994 |
10. |
IECD.No.28/08.12.01/94-95 |
22.11.1994 |
11. |
DBOD.No.Dir.BC.141/13.07.01-94 |
07.12.1994 |
12. |
RPCD.No.PLNFS.BC.165/06.03.01/94-95 |
06.06.1995 |
13. |
DBOD.No.Dir.BC.89/13:07:01/95 |
21.08.1995 |
14. |
DBOD.No.BC.99/13.07.01/95 |
12.09.1995 |
15. |
RPCD.No.PL.BC.120/04.09.22/95-96 |
02.04.1996 |
16. |
DBOD.No.Dir.BC.139/13.07.01/96 |
19.10.1996 |
17. |
DBOD.No.Dir.BC.10/13.07.01/97 |
12.02.1997 |
18. |
DBOD.No.Dir.BC.124/13.07.01/97-98 |
21.10.1997 |
19. |
DBOD.No. Dir.BC.33/13.03.00/98 |
29.04.1998 |
20. |
DBOD.No.Dir.BC.36/13.03.00/98 |
29.04.1998 |
21. |
DBOD.No.BP.BC.35/21.01.002/99 |
24.04.1999 |
22. |
DBOD.No.Dir.BC.100/13.07.01/99 |
11.10.1999 |
23. |
DBOD.No.Dir.BC.106/13.03.00/99 |
29.10.1999 |
24. |
DBOD.No.Dir.BC.114/13.03.00/99 |
29.10.1999 |
25. |
DBOD.No.Dir.BC.168/13:03:00-2000 |
27.04.2000 |
26. |
DBOD.No.BC.178/13:07:01/2000 |
25.05.2000 |
27. |
DBOD No. BP.BC 31/21.04.048/00-01 |
10.10.2000 |
28. |
IECD No. 9/04.02.01/2000-01 |
05.01.2001 |
29. |
DBOD No. Dir.BC 106/13.03.00/2000-01 |
19.04.2001 |
30. |
DBOD No. Dir.BC 107/13.03.00/2000-01 |
19.04.2001 |
31. |
IECD No. 101/13.07.01/99-2000 |
19.04.2001 |
32. |
RPCD.PLNFS.BC.No. 83/06.12.05/2000-01
|
28.04.2001 |
33. |
DBOD No. Dir.BC. 117/13.07.01/2000-01
|
04.05.2001 |
34. |
RPCD.Plan.BC.15/04.09.01/20001-02 |
17.08.2001 |
35. |
DBOD No.Dir.BC.75/13.07.01/2002 |
15-03-2002 |
36. |
DBOD No.Dir.BC.8/13.07.00/2002-03 |
26-07-2002 |
37. |
DBOD.No.Dir.BC.11/13.03.00/2002-03 |
30.07.2002 |
38. |
DBOD.No.Dir.BC.19/13.07.01/2002-03 |
19.08.2002 |
39. |
DBOD.No.Dir.BC.25/13.03.00/2002-03 |
19.09.2002 |
40. |
IECD.No.18/04.02.01/2002-03 |
30.04.2003 |
41. |
DBOD.No.BC.103/13.07.01/2003 |
30.04.2003 |
42. |
DBOD.No.Dir.BC.103A/13.03.00/2002-03 |
30.04.2003 |
43. |
DBOD.No.Dir.BC.10/13.03.00/2003-04 |
14.08.2003 |
44. |
DBOD.No.Dir.BC.38/13.03.00/2003-04 |
21.10.2003 |
45. |
DBOD.No.Dir.BC.39/13.03.00/2003-04 |
21.10.2003 |
46. |
DBOD.No.81/13.07.01/2003-04 |
24.04.2004 |
47. |
IECD.No.10/04.02.01/2003-04 |
24.04.2004 |
48. |
IECD.No.13/04.02.01/2003-04 |
18.05.2004 |
49. |
DBOD.No.BC.85/13.07.01/2003-04 |
18.05.2004 |
50. |
DBOD.No.BC.6/13.03.00/2004-05 |
08.07.2004 |
51. |
DBOD.No.BC.84/13.07.01/2004-05 |
29.04.2005 |
52. |
DBOD.Dir (Exp.).BC.No.83/04.02.01/2005-06
|
28.04.2006 |
53. |
DBOD.Dir.BC.5/13.03.00/2006-07 |
01.07.2006 |
54. |
DBOD.Dir (Exp.).BC.No.79/04.02.01/2006-07
|
17.04.2007 |
55. |
RPCD.No.Plan.BC.84/04.09.01/2006-07 |
30.04.2007 |
56. |
DBOD.Dir.BC.93/13.03.00/2006-07 |
07.05.2007 |
57. |
RPCD.No.Plan.BC.10856/04.09.01/2006-07
|
18.05.2007 |
58. |
DBOD.Dir.BC.6/13.03.00/2007-08 |
02.07.2007 |
59. |
DBOD.Dir.(Exp).BC.No.77/04.02.01/2007- 08
|
28.04.2008 |
60. |
DBOD.Dir.BC.14/13.03.00/2008-09 |
01.07.2008 |
61. |
DBOD.Dir.(Exp).BC.No.131/04.02.01/2008-09
|
29.04.2009 |
62. |
DBOD.Dir.BC.No.10/13.03.00/2009-10 |
01.07.2009 |
63. |
DBOD.Dir.BC.88/13.03.00/2009-10 |
09.04.2010 |
64. |
DBOD.Dir.(Exp).BC.No.102/04.02.01/2009-10
|
06.05.2010 |
65. |
Mail Box clarification |
14.05.2010 |
66. |
Mail Box clarification |
24.09.2010 |
67. |
DBOD.No.Dir.BC.73/13.03.00/2010-11 |
06.01.2011 |
68. |
DBOD.No.Dir.BC.81/13.03.00/2010-11 |
21.02.2011 |