Mumbai: RBI governor on Tuesday strongly chided the banks for not passing on rate cuts to the consumers and trotted out tone excuses after another to justify this.
He noted that “banks passed on rates “very modestly” despite enough liquidity in the system. Dr Rajan did not conceal his anger when he said “Earlier, some bankers said it was lack of liquidity that was holding the rates high. Now I hear from some that it is the fear of FCNR redemptions that is making them reluctant to cut rates. I have a suspicion that some new concern will crop up once FCNR redemptions are behind us first.”
He, however, held out hope that with the economic recovery credit demand would pick-up and once banks clean up their balance sheets, banks would compete for their business.
Mr Rajan has cut rates by 1.25 per cent but banks have barely passed on 60 per cent of this. He has criticised them for this in almost every earlier credit policy announcement.
Mr Rajan said that they would shortly make some revisions to the marginal cost of lending rates to make transmission swifter after seeing its working since April 1.
