RBI Nudges Banks to Cut Lending Rates

Mumbai, Apr 7 (PTI) RBI today nudged banks to cut lending rates in line with the central bank's accommodative policy stance, stressing that the sooner it happens, the better it would be for the economy.

"Given that there has been very little transmission from rate cut so far... we are waiting to see transmission take place... I have no doubt that this will happen. If it happens sooner it is better for the economy," RBI Governor Raghuram Rajan told reporters after the announcement of first bi-monthly monetary policy.

RBI Nudges Banks to Cut Lending Rates

Although RBI has cut policy rates by 0.50 per cent since January, banks are yet to pass on the benefit of rate cut to borrowers.

In the first bi-monthly policy statement for 2015-16, Rajan maintained status quo but expressed hope that competitive pressure and comfortable liquidity position would encourage the banks to cut lending rates.

"Comfortable liquidity conditions should enable banks to transmit the recent reductions in the policy rate into their lending rates, thereby improving financing conditions for the productive sectors of the economy," it added.

The RBI said that it would maintain accommodative stance of monetary policy going forward.

"The Reserve Bank will await the transmission by banks of its front-loaded rate reductions... into their lending rates," the policy said.

PTI

Read more about: rbi, interest rates
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