RBI to discuss monetary policy transmission with banks

The Reserve Bank of India (RBI) will talk to lenders later this month about a pass-through on lower policy interest rates, said Governor Shaktikanta Das on Monday.

Concerns over a full pass-through of lower interest rates to the real economy surfaced after Indian lenders lowered lending rates by only 5 basis points after a 25 basis point rate cut by the RBI in early February, raising questions on the efficiency of monetary policy transmission.

“Transmission of rates is very important especially after the central bank announces a rate cut,” Das told reporters after its board meeting in the capital.

“We will discuss that issue with the banks and see what needs to be done,” said Das, adding that he is set to meet with the heads of private and public sector banks on Feb. 21.

Earlier in the day, Rajnish Kumar, Chairman of State Bank of India, the country’s largest public sector lender said that the bank currently does not have any headroom to cut interest rates.