The RBI panel suggested that lending rates should be reset once every quarter, from the current practice of once a year. However, depositors’ acceptance for floating rate products may not come easy. Today, to reduce interest rate, without reducing deposit rate is not possible. The panel has suggested a risk-free curve involving rates on treasury bills, or certificate of deposits rates or the central bank’s policy repo rate. The panel has also recommended that banks may accept deposits, especially bulk deposits, at floating rates linked directly to one of the three external benchmarks.

Source: Mint October 05, 2017 18:33 UTC