As the RBI Monetary Policy Committee (MPC) meets on February 7-8 for next bi-monthly credit policy, Industry body Assocham has impressed upon the central bank and the Ministry of Finance to ensure adequate transmission of cuts in the interest rates.
In a press release released here on Monday, Assocham said that the RBI should cut interest rate by 75 basis points in view of dismal credit growth as well as subdued demand.
“The industry is expecting at least 50-75 basis points reduction in the policy interest rates and the banks should pass on the entire benefit to the borrowers,” it reads.
It added that, the demonetisation has resulted in windfall gains for the banks in the form of ultra low cost funds from the current account/saving account (CASA).
“Being majority owner of the banks and as a regulator, both the government and the RBI have roles in advising banks to pass on the commensurate reduction in the interest rates,” Assocham President Sunil Kanoria said.
According to a survey, seven out of 10 bank economists expect RBI to cut its repo rate by 25 basis points to 6 per cent. The other three expect the repo rate to remain unchanged. Slowing inflation and a fiscally responsible budget may sway the RBI, feel economists.
Earlier in December, the RBI’s Monetary Policy Committee, during its second bi-monthly monetary policy review -- the fifth of the fiscal -- kept the repurchase rate, or the short-term lending rate it charges on borrowings by commercial banks, unchanged at 6.25 per cent.
According to the panel, its decision to keep the key lending rates unchanged was taken after considering various global and local factors, such as a likely hike in the US interest rates, which has since been effected by the US Federal Reserve.
MPC) meets on February 7-8 for next bi-monthly credit policy, Industry body Assocham has impressed upon the central bank and the Ministry of Finance to ensure adequate transmission of cuts in the interest rates.
In a press release released here on Monday, Assocham said that the RBI should cut interest rate by 75 basis points in view of dismal credit growth as well as subdued demand.
“The industry is expecting at least 50-75 basis points reduction in the policy interest rates and the banks should pass on the entire benefit to the borrowers,” it reads.
It added that, the demonetisation has resulted in windfall gains for the banks in the form of ultra low cost funds from the current account/saving account (CASA).
“Being majority owner of the banks and as a regulator, both the government and the RBI have roles in advising banks to pass on the commensurate reduction in the interest rates,” Assocham President Sunil Kanoria said.
According to a survey, seven out of 10 bank economists expect RBI to cut its repo rate by 25 basis points to 6 per cent. The other three expect the repo rate to remain unchanged. Slowing inflation and a fiscally responsible budget may sway the RBI, feel economists.
Earlier in December, the RBI’s Monetary Policy Committee, during its second bi-monthly monetary policy review -- the fifth of the fiscal -- kept the repurchase rate, or the short-term lending rate it charges on borrowings by commercial banks, unchanged at 6.25 per cent.
According to the panel, its decision to keep the key lending rates unchanged was taken after considering various global and local factors, such as a likely hike in the US interest rates, which has since been effected by the US Federal Reserve.
