Repo-linked loans will ensure that policy rate changes by the RBI is instantly passed on to borrowers.

Indian Bank launches repo-linked home loan and vehicle loansImage: Surya Prakash SA via Flickr (CC BY-SA 3.0)
Money Loans Saturday, August 17, 2019 - 10:09
Written by  S. Mahadevan

Chennai-headquartered Indian Bank has made a few important announcements to coincide with its founding day. One of them is to link the retail loan products like home loans and vehicle loans to the RBI’s repo rate. The other announcements relate to the introduction of a savings bank account for senior citizens, IB Samman, and retail loan scheme IB Eco-Vahan.

The repo-linked retail loan is not new since another Chennai-based bank Indian Overseas Bank had already made an announcement on this. The borrowers will know that the rate at which they are borrowing is the rate at which the bank is borrowing its funds from RBI, which is the repo rate. Whenever the RBI makes changes in the repo rate, the borrowers will know their loan product’s interest will also change.

So far, the individual banks used to make a separate announcement each time. There were occasions when some banks may not pass on if there is a reduction or leave the interest rate unchanged even if there was an increase announced by the RBI. This will now change.

The Chairperson of Indian Bank, Padmaja Chunduru used the occasion to address the employees of the bank urging them to find new ways of bringing about customer satisfaction and make them happy with the bank’s service. She has referred to the directive from the government to the public sector banks. The government has desired that the banks find new, innovative and ‘out of the box’ ideas at individual branch levels through consultations.

The bank’s management personnel at various levels are spreading out to seek the suggestions from the customer-facing bank branches.

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