RBI group likely to moot two PLRs

The working group had received suggestions from Indian Banks’ Association (IBA) and other industry experts to rework the existing BPLR system and had formed a draft report. The panel met on Wednesday to discuss the report.

The working group, headed by RBI Executive Director Deepak Mohanty and comprising external experts and IBA, is likely to submit the final report to RBI Governor, D Subbarao by the end of this month, a banking industry source told PTI.

“The panel has accepted two PLRs — one for retail and one for wholesale borrowers. This is most likely to be inducted in the final report.

Ceiling on banks

Also, the committee has plans to put a ceiling on banks’ sub-PLR lending to enhance transparency in lending,” the source said. Though exclusion of home loans from the BPLR’s fold was under consideration, the working group is unlikely to accept this suggestion as it feels that double BPLR system will alone help to bring transparency in banks’ lending.

“They may not accept it (exclusion of home loans from BPLR). They feel that splitting prime lending rate to two types will be enough to safeguard the interests of customers,”the source said.

However, bankers are understood to have expressed differences in the method and constituents used to arrive at the double PLR model and the RBI working group will debate this matter in the coming days, the source said.The BPLR committee is likely to meet next week again to fine tune the draft report.

An IBA sub-group also met last Saturday to discuss the suggestions in the draft report.
Once RBI puts a ceiling to the sub-PLR lending, banks cannot lend to potential customers at very lower (sub-PLR) rates beyond a percentage of their total incremental advances.Reserve Bank constituted a special working Group to revisit the existing BPLR structure in July this year to bring more transparency in the manner in which banks arrive into the BPLR.