RBI makes it mandatory for banks to link retail loans for housing, MSMEs with external benchmarks from 1 October

In 2019, the RBI has already reduced the repo or short-term lending rate by 110 basis points, but the banks have reportedly passed on only up to 40 bps to borrowers. In order to allow faster transmission of policy rate cuts to borrowers, the Reserve Bank has said that the lenders must link all new floating-rate loans for housing, auto and MSMEs with external benchmark like repo from 1 October. RBI makes mandatory for banks to link all new floating rate personal or retail loans & floating rate loans to MSMEs to an external benchmark effective October 1 https://t.co/U0oYdxrgA6 — CNBC-TV18 September 4, 2019 The Reserve Bank of India move is after the industry and retail borrowers have been complaining that the banks do not pass on the entire central bank’s policy rate reduction to them. Therefore, it has now decided to make “it mandatory for banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark effective October 1, 2019”, the circular said. In 2019, the Reserve Bank has already reduced the repo or short-term lending rate by 110 basis points, but the banks have reportedly passed on only up to 40 bps to borrowers.