Keen to boost economic growth by making available cheaper capital, he met chief executives of public sector and private sector banks separately and conveyed government’s disquiet over the lack of enthusiasm on the part of lenders.
“The Finance Minister asked the CEOs of both the public and private banks to effect a corresponding rate cut of 75 basic points in response to RBI rate cut of same basis points since January,” an official statement said. “All banks unanimously expressed that in a period of 2 to 3 months, greater transmission of lower rates could be seen,” it said.
In an unusual move, top private ICICI, HDFC and Axis were called for discussions with the Finance Minister immediately after his meeting with PSU heads. Jaitley himself told reporters later that, “Some part of it (rate cut) have been passed on to <g data-gr-id="25">customers,</g> while some banks have not passed on.
I feel over the next few days ... some of the bankers felt that over the next few weeks, they would be in a position to work out greater cuts.” In the meeting, he asked the bank chiefs as to why the system effected a rate cut of only 25 basis points against 75 basis point <g data-gr-id="24">effected</g> by RBI since January.
Some of the banks, he said, have expressed their inability to pass on the rate cuts on account of problems with their respective balance sheets and higher rates on small savings schemes.
The statement said the CMDs said that until the cost of funds/deposits for the banks, as reflected in the re-pricing of their liability book at the new rate comes down, and liquidity levels at the new lower costs are tested, full transmission would not be viable.