Banks must stop introducing new lending rate when RBI cuts rates. Its cheating customers
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Whenever the Reserve Bank of India increases lending rate, the same is reflected in our floating rate loans. But, when the rates are reduced, the Banks - even SBI - introduces new rate code, thereby customers are forced to pay some switchover charges.
For example if your floating rate is: PLR +1 and at time of sanction PLR was 8% your interest on loan will be 8+1 = 9. If the lending rate is increaed by 1% then it will be increased to 9+1 = 10%.
If the lending rate is reduced by 1% ideally you should pay 7+1 = 8. But, Bank introduces PLR1 and attaches this new rate. Thereby, your rate will be 9% and only option is to switchover to new rate PLR1 by paying some charges (normally 0.5% of the limit).
This is loot on customers and defeats the purpose of floating rate apart from increasing the financial burden on customers.
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