There is a trend among borrowers to move towards fixed rate loans even as the Reserve Bank of India (RBI) moves towards rebalancing liquidity, according to Governor Shaktikanta Das.
“I think most of the banks till now have been giving floating interest rate loans. Now, there is a trend of people are moving towards fixed rate loans,” said Das in reply to a question posed by State Bank of India (SBI) Chairman Dinesh Kumar Khara at the SBI Banking and Economics Conclave
Asking banks to be investment-ready when the investment cycle picks up, the Governor emphasised that giving loans at floating or fixed interest rate is a commercial judgment of banks, and typically the RBI does not like to enter into those areas.
“Irrespective of the fact that the liquidity is in surplus, I think risk pricing of the various loans being extended by the banks has to be done diligently by them.
“The mere fact that there is excessive liquidity should not lead to any mispricing of loans because this excessive liquidity is not going to be a permanent feature,” said Das.