RBI Governor Shaktikanta Das meets bankers to enquire delay in cutting lending rates
The meeting, attended by heads of Punjab National Bank, Bank of Baroda, Bank of India, Bank of India, ICICI Bank, Kotak Mahindra Bank and IDFC First Bank, focused only on effective transmission of monetary policy.
Even after the last policy rate reduction, only two banks--SBI and Bank of Maharashtra--chose to do something, by lowering just one-fifth of what the RBI did--reducing their lending rate by 5 bps that too in some select buckets.
The tussle between RBI and banks over poor/delayed transmission began with when D Subbarao was the governor, who ended the BPLR based lending rate and brought in the base rate in July 2013.
But again banks refused to pass on the entire benefit, which forced the next governor Raghuram Rajan to end the base rate and push down the marginal cost based funding (MCLR) from April 2105.
But still the regulator was not happy with the pace of rate reduction and the past governor Urjit Patel had announced last year that from April this year the system would move into an external benchmark based loan pricing. However, Das at the last policy said this would be deffered.
In the sixth bi-monthly monetary policy review announced earlier this month, the RBI reduced the repo rate by 25 basis points to 6.25 per cent. Das had earlier said the decision on reduction of lending rates rest on the banks and RBI can only give directions.
At the meeting, bankers assured the governor that they will look into their lending rates in their monthly asset liability committee reviews when they review their marginal cost of funds based lending rates or minimum lending rates.
"We informed that the lending rates would relooked in the next monthly review," said another banker.
Bankers also had a brief discussion on external benchmark-based pricing of loans.
Das, however, did not discuss the external benchmark- based pricing as the draft paper is in the public domain, though this was supposed to kick in from April this year.
"RBI may convene another meeting to discuss those things in future," another banker said.