If you have taken a home loan in recent years, you may be paying higher interest rates between 10 per cent and 13 per cent, whereas new borrowers are charged 8-8.25 per cent for the first two or three years and later on at around 9 per cent (as per prevailing rates then), which may be still much less.
Being a loyal customer who has been paying EMIs (equated monthly instalments) for the past few years, ideally the lender should have rewarded you by charging interest a notch less than that charged to the new customer.
The floating rate home loans are benchmarked to PLR (Prime Lending Rate) or Benchmark Prime Lending Rate (BPLR).
The PLR is defined as “the lowest rate of lending offered for the most preferred borrower and for such loans which are fully secured.”
A committee headed by Executive Director was formed by the RBI felt that there was much less transparency in fixing the PLR and it recommended to do away with PLR and introduce a base rate comprising of all cost elements which can be identified and are common across borrowers.
The committee recommended charging the same rate of interest for new borrowers as well as old borrowers under floating rate loans.
When it was expected that the woes of lakhs of home loan borrowers would end, the leading bankers aired their inability to charge same rate of interest for all borrowers old and new, under floating rate home loans.
The RBI officials clarified that since incremental funds have brought down average cost of funds for banks, why cannot they pass on the benefit to old customers.
Some bankers have expressed the fear that offering same interest rate for all borrowers may invite legal disputes as interest spreads (loans offered at PLR-2%, PLR -3% and so on) varied from customer to customer.
The RBI should help set right the injustice meted out to existing borrowers.
News Published Under: The Hindu