New Delhi: The Reserve Bank's latest round of rate hike, which is aimed at curbing price rise, will have important impact on the matters related to economy. The policy decision taken on Tuesday would also lead to opening of more banks in smaller cities.

The announcement has given opportunity for the opening of more banks in cities with population 50,000 to 99,999, as the RBI withdrew the rule of acquiring prior permission from it before opening a branch in such cities.

However, the cities with more than one-lakh population continue to require prior permission from it. Also, the Central Bank will check the setting up of atleast one-fourth of the total number of new branchesin the rural areas.

It may be noted that the RBI had already abolished the compulsion of acquiring permission in September 2009 for opening a branch in cities with less than 50,000 population.

Tri-monthly review of MSME loans

Boosting the morale of small traders, the RBI will now strictly deal with banks which discourage giving loans to micro, small and medium industrial units. During its second tri-monthly analysis, the RBI has changed the half-yearly inspection to tri-monthly.

Notably, the banks are required to lend 50 percent of their industrial loans to SMSE till the end of this fiscal year. However, this limit has been raised to 60 percent for the next financial year.

UCB to give more home loans

The Urban Co-operative Banks (UCBs) can now distribute more home loans as the maximum loan limit for the UCB tier one category has been extended from Rs 25 lakh to 30 lakh. Moreover, the home loan limit has been raised for the UCB 2 tier category from Rs 50 lakh to Rs 75 lakh. Also, they are now free to give home loans for upto 20 years.

Review of loan re-organisation

The practice by commercial banks to make changes in the time period for loan repayment by debtors will also be subjected to change, as indicated by the RBI for which it has already constituted a working group for suggestions.

Notably the existing norms are in practice since 2008. Under those rules, the commercial banks use discretion to provide extra time for outstanding debtors. It is believed that the rising interest rates have worsened the outstanding debt situation and therefore changes in the norms are being thought about.

Transparency in loan rates

In order to ensure transparency in deciding loan rates, the RBI has constituted a working group to suggest on the new system. Following the recommendations of the working group, a new system will be formulated which, the RBI said, would be entirely transparent to make a consumer understand it easily. Besides, it will also bring uniformity in the loan rates.

JPN/Bureau