Benchmark rate for bank loans still a chimera

Banks are not happy with RBI's micromanagement, but it's essential when even a free market doesn't ensure competition

Come April, banks in India will have to link their floating rate retail loans and loans to micro and small enterprises to one of the four benchmarks – Reserve Bank of India’s (RBI) repo rate, the 91-day and 182-day treasury bills, any other benchmark market interest rate including overnight Mumbai interbank outright rate (Mibor), based on overnight call money rates, and even term Mibor with tenures of 14-day, one month and three months.

This will ring the death knell for MCLR or the marginal cost of fund-based lending rate, at least partially (it will continue to be used for other