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Banks told to speed up benchmark PLR switch

Hyderabad, Nov. 27: Indian Banks Association has issued guidelines to all its members to move towards a benchmark prime lending rate (PLR).

Association chairman and Union Bank of India chairman-cum-managing director V. Leeladhar said the guidelines will be effective from January 2004 after being endorsed by the bank boards.

Leeladhar said the major components of the benchmarking should be cost of funds, capital and operations and profit margins. "The objective is to make the entire exercise transparent and part of an asset liability management and distancing it from the vagaries of the market forces. However, the housing loans and a few other items will be delinked from the concept of benchmark PLR, he added.

He did not foresee any further slide in the interest rates as they were already at the rock-bottom level. "I presume they will be stagnant for sometime now," he said.

Leeladhar said rigid moves by banks on recovery of non-performing assets need to be softened in view of the recent Supreme Court decision on M/s Monoroy Chemicals Ltd. "Banks have to develop infrastructure and facilitators to help in the asset recovery process. We might even seek assistance from multinationals who had successfully championed the procedures," he said.

He was in Hyderabad to launch four Union Bank products, including Union Gold (bullion trading), Union Suraksha (insurance linked with HDFC), Union Billpay (payment gateway) and mutual funds distributions. "Union Bank had achieved ISO-9002 certification in 60 branches and plans to implement the same in another 160 branches in the current financial year," he added.

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