Most banks have reduced the base rate by 25-30 bps, barring a few like State Bank of India (SBI) and ICICI Bank, which have slashed the base rate by 40bps and 35 bps, respectively.
The Reserve Bank of India cut its policy rate by a surprisingly wide 50 basis points Tuesday as falling inflation allowed for greater policy breathing room – a moved aimed at keeping India’s economy growing despite a global slowdown and sluggish domestic business.
“The RBI has done its job, now it’s up to the banks to pass on these rate cuts”.
In the meantime, Rajan said that focus now will shift to ensuring that the cuts are passed on by the banks. However, lower interest rates will boost growth only if the government pushes through reforms that reduce its flab and boost competition in the wider economy through measures such as the goods and services tax, the bankruptcy code or labour and land market reforms.
India’s central bank has cut its core interest rate for the fourth time this year as it looks to help kick-start economic growth.
Since January this year, the banking regulator has lowered its repo rate by 125 basis points.
He cut interest rates aggressively -a move that will force most banks to lower lending rates more than they may be willing.
The SBI has also reduced its fixed deposit rates by 0.25 per cent across various maturities from October 5. However, there is no change in CRR and SLR. while complimenting Union Finance Minister Arun Jaitley for impressing upon RBI to make impressive cut in repo rates said that it was long awaited demand of trade and industry including CAIT which has exceeded the expectations.
The transmission by banks following the 50 basis points repo rate cut by RBI governor Raghuram Rajan continued for the second day with two banks announcing base rate cuts.
IDBI Bank and UCO Bank have cut their base rates by 25 bps each to 9.75 per cent and 9.70 per cent, respectively. Ask the government about what it wants to do about transmission. Base rate is the benchmark to which all lending rates are linked.
Shilan Shah, an economist at Capital Economics, added that the latest cut implied the central bank might have reached a “turning point“, marking the end of its easing cycle.