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RBI nudges banks to pass on lower rate benefits to consumers

Says 'easy liquidity conditions' should enable smooth transmission of the policy action through various market segments.

Mumbai: RBI today nudged banks to take a cue from cut in small saving schemes and pass on benefit of benefit of declining interest rates to consumers.

The Reserve Bank reduced the short term lending rate (repo rate) by 0.25 per cent to 6-year low of 6.25 per cent in the fourth bi-monthly monetary policy statement.

It also said that easy liquidity conditions engendered by it's operations should enable the smooth transmission of the policy action through various market segments.

"Furthermore, banks should find added impetus for better transmission by the recent downward adjustment in small savings rates," said the resolution by the 6-member Monetary Policy Committee headed by RBI Governor Urjit Patel.

RBI has reduced key interest rate (repo rate) by 175 basis points since January 2015. However, the banks have been reluctant to pass on the entire benefits to consumers.

The government had last week reduced the interest rates on small savings schemes by 0.1 per cent for the October- December quarter of the 2016-17 fiscal. The schemes include, Public Provident Fund, Kisan Vikas Patra, and Sukanya Samriddhi Account.

( Source : PTI )
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