A Reserve Bank panel on Thursday suggested a benchmark floating interest rate, especially for home loans, to bring greater transparency in the pricing of credit. “The Indian Banks Association (IBA) may develop a new benchmark for floating interest rate products, namely, the Indian Banks Base
Rate (IBBR), which may be collated and published by IBA on a periodic basis,” according to the draft report of the Working Group on Pricing of Credit.The panel headed by former RBI Deputy Governor Anand Sinha said to begin with, IBBR may be used for home loans.
The working group was set up to examine issues related to discrimination in the pricing of credit and recommend measures for transparent and appropriate pricing of credit under a floating rate regime.
The floating rate loan covenant may have interest rate reset periodicity and the resets may be done on those dates only, irrespective of changes made to the base rate or minimum lending rate within the reset period, it said.