MANU/RMIC/0398/2015

Ministry : Reserve Bank of India

Department/Board : Department of Banking Regulation

Circular No. : DBR.No.Dir.BC.67/13.03.00/2015-2016
                   RBI/2015-2016/273

Date : 17.12.2015

All Scheduled Commercial Banks
(Excluding RRBs)

Dear Sir/ Madam

Guidelines for interest rates on advances

A reference is invited to paragraph 22 of the first Bi-monthly Monetary Policy Statement 2015-16 announced on April 7, 2015 which stated that in order to improve the efficiency of monetary policy transmission, the Reserve Bank will encourage banks to move in a time-bound manner to marginal-cost-of-funds-based determination of their Base Rate'. Accordingly, draft guidelines on computation of Base rate based on marginal cost of funding were hosted on the RBI website on September 1, 2015 for comments/ feedback from stakeholders.

2. Taking into consideration the feedback received, it has been decided that banks shall follow the following guidelines for pricing their advances:

a) Internal Benchmark

i. 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.

ii. The MCLR will comprise of:

a. Marginal cost of funds;

b. Negative carry on account of CRR;

c. Operating costs;

d. Tenor premium.