Pricing for the ultimate beneficiary has been capped at Base Rate plus 8%. Here we have slightly differed from the Nair Committee recommendations, which had linked it to bank’s Lending Rate plus 6%. We felt that linking it to Base Rate would ensure greater transparency in pricing and ease of monitoring.
The ceiling on pricing, in contrast to the general freedom given to banks in pricing loans, is because free market still does not exist for the poor and hence, pricing is prone to distortions. The Nair Committee’s recommendation to restrict the bank loans for on-lending, buy-outs and securitization to a maximum of 5% of ANBC is not accepted.