January 10, 2011

Members of the Council.

Sub : Guidelines on Base Rate System

Dear Member

As members are aware, the Reserve Bank of India issued detailed guidelines for the banks with regard to switching over to the “Base Rate System” in computing interest rates for loans with effect from July 1, 2010. These guidelines were issued vide RBI Circular No. RBI/2009-10/390 dated April 9, 2010. Para 2 (iii) of the aforesaid Circular stated that in order to give banks some time to stabilize the system of base rate calculation, banks are permitted to change the benchmark and methodology any time during the initial six month period i.e. end December 2010.

The RBI has now issued a Circular No. RBI/2010-11/361 dated January 6, 2011 extending the time given to the banks to change the benchmark and methodology in computing base rates from the end December 2010 to June 30, 2011.

Members may please note the above.

With regards

Ali Ahmed Khan
Executive Director