Governor of Reserve Bank of India Shantikanta Das said that he would meet top officials of state-run and private sector banks by the end of this month. They will discuss issues of transmission of the bank’s rate cut move and its growing change on a wider economy.
Das has also said that the transmission rates is especially important after the central bank announces a rate cut. This has already been stated in a post-MPC conference. They have had an interaction with CEOs and MD’s with both private and public sector banks.
Earlier in this month, the RBI cut interest rates by 25 basis points.
The center has ensured lower rates against the backdrop easing price pressures. The retail inflation dropped to a 19 month low while wholesale price inflation dropped to a 10 month low. Ever since January 2014, RBI has lowered the key policy rates by 175 basis points (100 basis points equal a percentage point). However, banks have lowered the home loan rate by 130 bps with a few gains. As opposed to this, banks and home finance firms raising the rates quicker when the policy rates have raised.
Banks have been angered by the huge gap between deposit and credit growth as they are unable to lower the lending rate. Banks have increased their deposit rate in the third quarter in view of the liquidity crunch.
