home loan borrowers can look forward to a benign and transparent interest rate regime in the coming days if the reserve bank of indias rbi recent measures start making an impact the revision in base rate methodology announced by the rbi last month will be implemented soon base rate is the minimum rate at which banks can lend the announcement was preceded by the rbis nudge to banks to lower lending rates when it slashed repo rate by 25 basis points in january and statutory liquidity ratio slr by 50 basis points to 215 earlier this month slr is the minimum portion of net deposits that banks must hold in government securities the message is clear interest rate cycle has started turning industry observers believe that these steps could translate into reduced interest rates for home loan borrowers they constitute a strategic move by the rbi governor the slr cut has made liquidity of rs 45000 crore available in the system which will force banks to get aggressive on the lending front consequently credit offtake will get a boost and the benefits of the rate cut will be passed on to the borrowers says vipul patel founder of mortgageworld a loan consultancy firm the new approach when the rbi reduced rates by 25 basis points in january most banks refrained from passing on the benefit of the rate cut to its borrowers this has happened before as well the central bank has on several occasions expressed concern over the transmission process not working to prod banks into passing on the effect of policy rate changes to borrowers the rbi has asked banks to revise the formula for arriving at their base rates banks have to put the new formula into effect by 19 february the workings until now banks pegged their base rate to the average cost of deposits or the deposit rate for a bucket deposit tenure of their choice many banks opted to use rates of deposit for buckets with a small deposit base which was not reflective of their overall cost of funds as the benchmark to calculate the base rate once the new methodology is effective they will have to take into account either costs on deposits that have the largest share in the deposit base or average cost of funds or marginal cost of funds where the card rate for deposits of one or more tenor is the basis the deposits in the chosen tenors should have the largest share in the deposit base of the bank states the rbi circular the assumption is that the deposit with the highest share of the deposit base will be more representative of the banks cost of funds any increase or decrease in this bucket will have to be passed on to the borrowers so far the formula was to be reviewed every five years now this stands reduced to three which is a positive change adds sukanya kumar founder retaillendingcom even the existing base rate regime was