Scope for further reduction in bank lending rate, says Patel

While maintaining a status quo in the sixth bi-monthly monetary policy, RBI has said, "The Committee believes that the environment for timely transmission of policy rates to banks lending rates will be considerably improved if three key measures tackled well."

RBI's governor Urjit Patel on Saturday stated that there is further room for reduction in banks lending rate. Photo: Reuters

The Reserve Bank of India's (RBI) governor Urjit Patel on Saturday stated that there is further room for reduction in banks lending rate.

In a PTI report, Patel said, "There is some scope for further reduction in bank lending rate."

Over the past month, banks have made sharp cuts in lending rates by 10 basis points - 90 basis points. Home loan borrowers have gained the most, as banks have been aggressively lowering interest rates in this segment.

While maintaining a status quo in the sixth bi-monthly monetary policy, RBI has said, "The Committee believes that the environment for timely transmission of policy rates to banks lending rates will be considerably improved if three key measures tackled well."

These three key areas were - (i) the banking sector’s non-performing assets (NPAs) are resolved more quickly and efficiently; (ii) recapitalisation of the banking sector is hastened; and, (iii) the formula for adjustments in the interest rates on small savings schemes to changes in yields on government securities of corresponding maturity is fully implemented.

Reportedly Patel said, "Segments in which NPAs emerged pertain to sectors with long gestation projects; NPAs are a legacy issue."

Going ahead, Patel also said, "Disclosure about number of demonetised currency deposited should be verifiable number in physical & accounting sense and not an estimate."

Urijit Patel along with six members of monetary policy committee kept policy repo rate unchanged at 6.25%. Also shifted the credit policy stance to neutral from accomodative.

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