Also non-banking finance companies have been brought under the RBI’s Ombudsman schemes which will make it easier for borrowers to get their complaints resolved.
In April 2016, RBI had asked banks to replace their old benchmark – the Base Rate – with the marginal cost of lending rate (MCLR). The MCLR was a more efficient way of pricing loans as it was directly linked to cost of funds. However, those who had raised loans before April 2016 continued to have their loans priced on the basis of the Base Rate.
In its monetary policy statement, the RBI said “It is observed that a large proportion of bank loans continue to be linked to the Base Rate despite RBI highlighting this concern in earlier statements. Since MCLR is more sensitive to policy rate signals, it has been decided to harmonize the methodology of determining benchmark rates by linking the Base Rate to MCLR with effect from April 1, 2018”.