Millennium Post

Centre asks PSU banks to cut rates... but they want more RBI easing

The issue of lowering interest rates was discussed on Wednesday in a meeting of heads of all state-run banks and other financial institutions, which was chaired by Indian Finance Minister Arun Jaitley and attended by top Finance Ministry officials as well as representatives of RBI, SIDBI and NHB, among others.

While there was no official word on whether the banks were nudged to cut rates, sources said that the government impressed upon them to consider interest rate easing while taking into account their cost of funds and other factors.

The meeting followed RBI cutting its key policy rate by a cumulative 0.5 per cent in the last two months, including a 25 basis points cut announced last week.

But only a few banks have lowered their rates since January 15, when RBI announced the first of its two successive rate cuts. After the meeting, Minister of State for Finance Jayant Sinha said, “First with respect to the rate cut, we obviously had a discussion on RBI’s actions... and we tried to understand exactly how the banks are thinking about and the banks pointed out what they have already done.”

“As far as retail loans are concerned they have already brought down rates a fair bit, we discussed that,” he said.

Asked when banks can cut their base rates, Sinha said “Let’s wait and see how that (repo rate cut) plays out... We will see once certain banks starts to take action we will see how it unfolds.” Some of the banks said they would wait till the next bi-monthly monetary policy review of the RBI on April 7 before taking any rate cut decision.
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