Those who applied for home loans a long time earlier can now expect a bit of good news. People who took home loans prior to April 2016 can now get the benefits of a lower marginal cost of lending rate. This is because banks have been directed by the Reserve Bank of India (RBI) for making use of the new benchmark even in case of loans which are older.
NBFCs have also come under the Ombudsman schemes of the Reserve Bank of India (RBI). This will make it really easy for home loan borrowers for resolving their complaints. RBI had previously directed banks in 2016 for replacing their previous benchmark, i.e. the Base Rate with the MCLR (marginal cost of lending rate). The latter was a more effective method for loan pricing since it was linked directly to the cost of funds.
Those who had taken loans prior to April 2016 continued to have loan pricing as per the Base Rate. The Reserve Bank of India (RBI) has stated that a major chunk of bank loans still remain connected to the Base Rate in spite of this issue being highlighted by the RBI previously. The MCLR is a little more sensitive with regard to policy rate fluctuations. The benchmark rate methodology has now been harmonized by the connection of the Base Rate to the MCLR which will come into effect from the 1st of April, 2018.