RBI asks banks to extend lower rates on loans to existing borrowers

The Reserve Bank of India (RBI) has asked banks to enable existing home loan borrowers to benefit from lower rates along with new customers.

According to a Reuters report citing a senior IBA official, the RBI in a letter to the IBA has asked that banks consider existing home loan borrowers to avail benefits of lower rates along with new customers.

Last year banks had told RBI that the reduced rates on all home loans were not available to exisitng borrowers.

Bankers say that repricing of all home loans donwards to 8 per cent was not a feasible proposition as it would reduce their margins significantly.

According to a senior IBA official quoted by the news agency, the customer service department wanted banks to reconsider their decision of offering lower rates only to new customers.

The issue had been raised by RBI deputy governor K C Chakrabarty last month at the monetary policy review meeting, according to a banker.