Domestic banks will adopt the SBR lending framework from August.
According to the information released by the banks in the country, the banks in the country will adopt SBR to replace the existing BR rates from August 1, 2022. This measure will only affect new borrowers, while existing borrowers will not be affected.
The Standardised Base Rate, or SBR, is a measure initiated by the National Bank to standardise lending benchmark rates and make it easier for borrowers to compare the rates offered by different banks.
Under the existing Base Rate (BR), each bank had a different BR rate, so borrowers could not compare the rates offered by each bank. Under the new SBR system, all banks will have the same rate, so borrowers will have a clear picture of the interest rates offered by each bank.
The new lending framework will be Effective Lending Rate = SBR + Spread, and each bank will be required to follow the SBR set by the National Bank, which is the Overnight Policy Rate (OPR) of the National Bank. It is up to the bank to determine the Spread, i.e. the profit.
For example, if Bank A offers a loan rate of 3.75% and the SBR is 2.25%, then you know that Bank A’s profit is 1.50%. If Bank B offers a loan rate of 4.25% and the SBR is 2.25%, then Bank B’s profit is 2.00%.
From this example, you know that Bank A is offering a more attractive loan rate.
It is important to note that when the borrower signs the loan contract, the interest rate of Spread will be clearly stated in the contract. Banks are not allowed to increase the Spread rate at will, unless the borrower is a credit risk, for example, if the borrower defaults on the loan.
Each bank must adjust the SBR rate within 7 business days after the National Bank announces the latest OPR.
