For Quick Alerts
For Daily Alerts

Rajan nudges banks to cut lending rates

By Religare

RBI Governor Raghuram Rajan said there is a need for banks to cut their lending rates anticipating the benefits which will be accruing from the central bank's rate cuts, reported PTI.

"I think there is something to be said for the fact of the slow pace of transmission, that some front loading by the banks themselves may be useful," he said speaking at the second SBI economics and banking conference.


The Reserve Bank has been vociferously asking banks to cut their rates and transmit the benefits to end borrowers ever since it started reducing rates this year. It has flagged transmission of previous actions as one of the pre-requisites for further cuts.

According to RBI, banks have cut by an average of 0.30 per cent as against its 0.75 per cent cut in the key lending rate in 2015.

Bankers say that deposits, which decide its cost of funds and are contracted at higher rates, take time to reprice and hence, it takes time to pass on the benefits to borrowers.

Speaking on the sidelines of the same event, ICICI Bank's chief executive and managing director Chanda Kochhar said, " A 75 bps cut translates into 40-45 bps cut in cost of funds for banks. You've already seen a 30 bps cut. Transmission will never be a one-is-to-one correlation with monetary policy rates."

The government and the industry feel that a rate cut can help give a boost to the sagging economic growth and will also help the sentiment.

Story first published: Friday, August 21, 2015, 9:10 [IST]
Company Search
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more