RBI Hopes Banks are More Ef­fec­tive in Pass­ing on Rate Cut This Time

The Economic Times - - Economy - Our Bureau

New Delhi: The Re­serve Bank of In­dia (RBI) on Wed­nes­day ex­pressed hope that trans­mis­sion of lower in­ter­est rate through banks will be more ef­fec­tive this time. RBI had cut repo rate, the key pol­icy rate, a day ear­lier by 25 ba­sis points or 0.25 per­cent­age points to 6.5%, the lowest in the past five years.

“There is a holis­tic view this time, there is a rate cut, there is liq­uid­ity frame­work, and Mar­ginal Cost of Funds based Lend­ing Rate (MCLR) has also be­come op­er­a­tional from April1. We are quite con­fi­dent that with com­bi­na­tion of all these fac­tors trans­mis­sion would be much more ef­fec­tive,” said RBI deputy gover­nor SS Mun­dra.

It will be un­fair to say noth­ing has been trans­mit­ted, Mun­dra said. “There had been trans­mis­sion, may be slightly less than the ex­pec­ta­tions,” he said.

Mun­dra also cau­tioned against jump­ing to con­clu­sions with re­gard to Panama Pa­pers. “It would be too hasty to jump to a con­clu­sion that ev­ery­thing is il­le­git­i­mate or ev­ery­thing is le­git­i­mate. There would be all kind of cases once the de­tails are avail­able; we will look into the ev­i­dence along with the team. Then it would be fair to reach to a con­clu­sion,” he said. To help mi­cro, small and medium en­ter­prises (MSMEs), Mun­dra said RBI will lay down a frame­work by Septem­ber for ac­cred­i­ta­tion of credit coun­sel­lors who can act as fa­cil­i­ta­tors for en­trepreneurs to ac­cess the for­mal fi­nan­cial sys­tem with greater ease.

“Credit coun­sel­lors will also as­sist MSMEs in pre­par­ing project re­ports in a pro­fes­sional man­ner which would, in turn, help banks make more in­formed credit de­ci­sions,” he said.

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