Centre to banks: Pass on rate cut

New Delhi: The finance ministry on Tuesday indicated that banks need to pass on the rate cut by RBI to consumers. “Banks need to undertake transmission of rates,” said economic affairs secretary Shaktikanta Das. Mr  Das said India needs to become a low cost economy both in interest rates and in other transactional costs. “Some of the banks have already reset their interest rates taking into account the marginal cost of lending and done some amount of reduction of rates consequent to all these measures and consequent to RBI’s announcement on Tuesday the banks will perhaps need to do some more transmission of reduction of policy rates of RBI,” he said.    

Mr Das said that government signalled a regime of low interest rates through 3.5 per cent fiscal deficit and reset of small saving rates. “RBI policy rates in same direction,” he said. The minister of state for finance Jayant Sinha said the Budget has taken various fiscal and reform initiative, thus creating space for monetary easing. “In co-ordination with RBI we really have to amplify both fiscal initiative and monetary initiative that are now in the pipeline. That really is what we are working in right now as we do so we will provide the boost to the economy,” he said. “BI actions today are very welcome. Obviously we believe that the rate cut which has been effective would be very good stimulus for the economy,” he added.

The finance minister said that government will push for consolidation of the PSBs once they are recapitalised. “We have now undertaken this exercise of recapitalisation of banks within the existing resources,” he said.