RBI Monetary Policy: Borrowers Of Home And Auto Loans Can Now Switch To Fixed-Rate Regime

RBI Governor Shaktikanta Das during the bi-monthly monetary policy outcome, said the lenders will have to clearly communicate with the borrowers about tenor and EMI

Governor Shaktikanta Das has said to keep policy rate unchanged at 6.5 per cent. This was third time in a row that the RBI opted for a pause in rate hike.

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The Reserve Bank of India (RBI) on Thursday said it will come out with a framework allowing borrowers to switch to fixed interest rate from floating interest rate, a move that would provide relief to borrowers of home, auto, and other loans reeling under the impact of high interest rate. RBI Governor Shaktikanta Das during the bi-monthly monetary policy outcome, said the lenders will have to clearly communicate with the borrowers about tenor and EMI.

"The supervisory reviews undertaken by the Reserve Bank and the feedback and references from members of public have revealed several instances of unreasonable elongation of tenor of floating rate loans by lenders without proper consent and communication to the borrowers," he said. To address the issue, it is proposed to put in place a proper conduct framework to be implemented by all Regulated entities to address the issues faced by borrowers, he said.

"The framework envisages that lenders should clearly communicate with the borrowers for resetting the tenor and/or EMI, provide options of switching to fixed rate loans or foreclosure of loans, transparent disclosure of various charges incidental to the exercise of these options, and proper communication of key information to the borrowers," he said. The detailed guidelines in this regard would be issued shortly, the governor said.

To enable the Infrastructure Debt Funds to play a greater role in financing of the infrastructure sector and to move towards the regulatory objective of harmonisation of regulations applicable to various categories of NBFCs, Das said a review of the extant regulatory framework for IDFs has been undertaken in consultation with the government.

The revised framework envisages withdrawal of the requirement of a sponsor for the IDFs; permission to finance Toll Operate Transfer projects (ToT) as direct lenders, access to ECBs; and making tripartite agreement optional for PPP projects, he said. The Infrastructure Debt Fund was created as a separate category of NBFCs in 2011.

Das has announced to keep policy rate unchanged at 6.5 per cent. This was third time in a row that the RBI opted for a pause in rate hike. During his address, Governor Das said that the MPC unanimously voted to leave the repo rate unchanged at 6.5 per cent. He said the Standing Deposit Facility (SDF) rate also retained at 6.25 per cent. Marginal Standing Facility rate and Bank Rate also retained at 6.75 per cent. The MPC also decided to remain focused on withdrawal of accommodationwith preparedness to act should situation so warrant.