RBI to look into loan rate hikes

Reserve Bank of India (RBI) deputy governor KC Chakrabarty said on Friday that the central bank would look into why banks were raising loan rates by such hefty amounts when their costs were not going up in the same proportion. “We find that banks are increasing rates by 2.5 per cent when the cost of funds is going up by just 1 per cent,” Chakrabarty said at the inaugural session of Bancon 2011. A pricing committee has already been set up by the RBI and it would look into the matter to ensure transparency, he said. The deputy governor observed that the central bank had asked banks to waive the pre-payment penalty on floating rate loans “but we are not able to understand why banks are unwilling to do so”.

Source : Indian Express