The Reserve Bank of India for a very long time expressed its displeasure that the facilities the RBI is giving to banks in a Rapo rates are not given to its customers. The entire benefits banks have taken for itself. The banks lost huge money in bad loans (NPA) or in corruption in bank itself. That is why the banks not transferred the RBI benefits to people. It is unethical act of the bank and improper behavior toward customers.
Now the Reserve Bank has taken a decision to benefit the bank customers and it will be compulsory for the banks to implement it. All the floating rate loans will have to be linked with external benchmark. With this the interest on home loans, personal loans for on loans for MSME will get linked with the external benchmark.
This decision will come into effect from October 1. The RBI will decide the external benchmark by Rapo rates. The Government treasury bills of 3 to 6 month can be included into the financial benchmark. The public benchmark will be linked with market interest rates. Uptill now the banks were deciding the interest rates on the basis of MCLR.
But the loans already taken will remain based on MCLR. The benefit of new rule will be given to floating loans.
The investors can switch on for new rule. They will be charged interest as new customers. The last three Governors of the RBI Mr.D Subba Rao, Mr.Raghuram Rajan and Mr.Urjit Patel persisting asked the bank to transfer the RBI benefit to it on to customers bank kept all the Rapo benefits to itself.
Now the new rule is made compulsory for banks accept and implement it. Now it should be made a statutory for the banks to carry out all the instruction issued by the RBI will compulsory and enforceable.
The RBI has also taken a tough stand on the overdraft facility. The banks are asked to audit temporary account and see if they are being misused for overdraft services. Amids the rise of bank frauds the RBI has alerted all the lenders of instances where intermediary or transitory accounts in banks have been misuse to hide bad loans or mask money laundering.