What changed
The Bank Rate was reduced from 9.50% to 9.00% effective April 17, 2012, as previously communicated in circular dated April 26, 2012. Consequently, the interest rate on refinance for small-scale industries under Section 17(2)(bb) read with Section 17(4)(c) of the RBI Act, 1934, was also revised to 9.00% from the earlier rate.
What it means for you
Urban co-operative banks will see lower penal interest rates on reserve requirement shortfalls, as these are linked to the Bank Rate. The reduced SSI refinance rate makes borrowing cheaper for banks under this facility, potentially easing liquidity for lending to small-scale industries.
What you must do
- Update internal systems to reflect the revised Bank Rate of 9.00% for calculating penal interest on reserve shortfalls.
- Adjust the interest rate on SSI refinance availed under Section 17(2)(bb) to 9.00% with effect from April 17, 2012.
- Communicate the rate change to relevant departments handling reserve compliance and refinance operations.
- Review any outstanding refinance transactions to ensure correct application of the revised rate.
Who it affects
Primary (Urban) Co-operative Banks, Banks availing SSI refinance under Section 17(2)(bb) of RBI Act, Banks subject to penal rates on reserve requirement shortfalls
What is the effective date for the revised Bank Rate and SSI refinance rate?
Both rates are effective from April 17, 2012, as per the circular.
Does this circular change any other rates besides the Bank Rate and SSI refinance?
The circular only mentions the Bank Rate and the SSI refinance rate under Section 17(2)(bb). Penal rates linked to the Bank Rate are also revised accordingly.