RBI Governor to meet bank CEOs to discuss rate cut transmission

The Reserve Bank of India (RBI) Governor will soon meet chief executives of public sector banks to discuss, among other things, the issue of monetary policy transmission. This follows the central bank lowering the interest rates for the first time in one-and-a-half years.

Banks have always been reluctant to reduce interest rates whenever there is a rate cut by the RBI.

“Whenever there is policy rate reduction, it would be RBI’s expectation that monetary transmission does takes place,” RBI Governor Shaktikanta Das said during the post monetary policy media interaction.

“But we have to keep in mind that fixing the rate of the interest is a function of the bank. We will be having an interaction in the next fortnight or so with the CEO and MDs of all banks where we will discuss these issues,” he added.

Banks have been increasing lending rates since March 2018. While the RBI has proposed that banks should move to an external benchmark for loan pricing from April 1, lenders have been opposing the move saying their funding costs were not linked to the external benchmarks proposed by the regulator.

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Source:The Hindu

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