WHY BANKS’ LEND­ING RATES ARE STICKY

India Today - - SMART MONEY HOME LOAN -

1

A re­duc­tion in the repo rate doesn’t di­rectly lead to lower fund costs for banks, since de­posits ac­count for as much as 80 per cent of bank bor­row­ings

2

Due to slow credit growth and com­pe­ti­tion from fi­nan­cial in­stru­ments like small sav­ing schemes, banks haven’t been able to cut de­posit rates

3

High de­posit rates have kept the cost of funds high for banks, which has pre­vented them from cut­ting lend­ing rates in line with RBI repo rate cuts

4

The NPA prob­lem has also put pres­sure on bank mar­gins, fur­ther im­pact­ing their abil­ity to sig­nif­i­cantly re­duce lend­ing rates

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