Confusion reigns as banks shift to base rate regime

State Bank of India has started notifying its customers through newspapers and telling them that all effective rates will be the same. Punjab National Bank has begun the process of communicating to its branch and regional managers, who in turn will educate the customers about the new guidelines.

However, a majority of the banks are still puzzled about communicating to their customers on the regime shift. Bank of India and HDFC Bank are still waiting for their ALCO to price their loans. ICICI Bank too has not yet decided on loan pricing. However, a top official at ICICI Bank told CNBC-TV18 that the bank will not be changing most of its effective rates.

Sources say banks have told the Reserve Bank of India to make a notification on their website ordering the end of the Benchmark Prime Lending Rate. Bankers feel this will help customers make the shift towards the new base rate system. The RBI, sources said, is working on the draft of the notification as there are legal issues involved. Sources at the RBI added that teaser rates are fine as long as existing customers can also migrate into new loans.