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Banks gets new deadline to comply with new method for base rate computation

January 6, 2011‐ New Delhi

The Reserve Bank of India (RBI) has extended the date given out to banks to adopt the new method for base rate computation from the earlier set date of December 31, 2010 to June 30, 2011. With this banks in India will get 6 months more to adopt the new minimum lending rate.

This new system of computation includes factors such as cost of deposit and average return on net worth and was introduced in a bid to make Banks more transparent and careful when lending. Banks can review the base rate on a quarterly basis with the approval of the board or the asset liability management committees.

Under the new system, borrowers are charged interest rates over the base rate depending on their credit profile.

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