RBI links all floating rate loans to Medium Enterprises to external benchmark rate

RBI links all floating rate loans to Medium Enterprises to external benchmark rate

• RBI has mandated that all new floating rate loans to the Medium Enterprises extended by banks from April 01, 2020 shall be linked to the external benchmarks.

• Earlier in September 2019, all new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises (MSEs) extended by banks were linked to external benchmarks. Due to its success, the above step has been taken.

• The rates can be benchmarked to one of the following:

• •  Reserve Bank of India policy repo rate
  •  Government of India 3-Months Treasury Bill yield published by the Financial Benchmarks India Private Ltd (FBIL)
  • Government of India 6-Months Treasury Bill yield published by the FBIL
  • Any other benchmark market interest rate published by the FBIL.

Points to remember:

1. All new floating rate loans to which sector will be linked to external benchmarks from April 01, 2020?

Source: RBI