At the last monetary policy review on August 4, Rajan had even linked next easing to banks cutting their rates more aggressively.

In the first Bi-monthly Monetary Policy Statement 2015-16 in April, RBI had said that in order to improve the efficiency of monetary policy transmission, it will encourage banks to move in a time-bound manner to marginal-cost-of-funds-based determination of their Base Rate.

Banks currently follow different methods for computing Base Rate. While some use the average cost of funds method, some have adopted the marginal cost of funds while others use the blended cost of funds (liabilities) method.

“It was observed that Base Rates based on marginal cost of funds are more sensitive to changes in the policy rates.”

Yesterday, HDFC Bank and Canara Bank had further cut their base rates.

RBI has proposed April 1, 2016 as the effective date to implement the guidelines.

The draft further said the new method will be helpful in the medium term goal of banks pricing their floating rate loans linked to an external benchmark.

Once Financial Benchmarks India Pvt Ltd (FBIL) starts publishing various indices of market interest rates, banks will be encouraged to price their deposits as well as advances with reference to the external benchmarks published the FBIL, it added.

RBI has sought comments on the draft guidelines till September 15.