Finance Minister Arun Jaitley on Friday said that banks have promised greater rate cuts in the coming days and weeks which will help reduce EMIs on loans.
The government, Jaitley said, would also consider favourably the demand of PSU banks for more capital infusion, over and above what was earmarked in the budget for 2015-16.
After discussing a host of issues like transmission of rate cuts, problems of higher bad loans and health of the economy with heads of state-owned banks, the Minister said that financial services secretary would look into projects held up for want of funds and exuded confidence that soon economy would move to higher growth trajectory.
As regards the transmission of >rate cuts by the Reserve Bank , the Minister said the banks gave detailed presentation on how each one of them reduced their lending rates.
“Some part of it (rate cut) have been passed on to customers, while some banks have not passed on. I feel over the next few days ... some of the bankers felt that over the next few weeks, they would be in a position to work out greater cuts,” the Minister said.
Some banks, Jaitley said, expressed their inability to pass on the rate cuts on account on problems with their respective balance sheets and higher rates on small savings schemes.
However, he said that “the environment was optimistic. Since the movement in the banking sector appears to be for the better, this gives up a further hope of a greater recovery as far as economy is concerned.”
Many banks, including the market leader SBI, had cut interest rates after RBI reduced repo (lending) rate by 0.25 per cent in its second bi-monthly monetary policy on June 2.
RBI since January had reduced the repo rate by a total of 0.75 per cent in three tranches.
As regards the bad loans, Jaitley said it has come down in the January-March quarter and hoped that the situation would improve further with pick up in economy and higher public spending, especially in infrastructure sector projects.
Rate cut to vary from bank to bank
After the meeting, bankers said there would be rate cuts in the next few days and could vary from bank to bank.
Each bank would take decision in its Asset Liability Committee (ALCO). It could between 0.10 per cent and 0.30 per cent in the next few weeks, bankers said.
Dena Bank Chairman and Managing Director Ashwani Kumar said, “Banks have expressed difficulty in passing rate cut immediately to the Finance Minister. However, banks would be cutting rate in the days to come when they review their asset liability position.”
There is improvement in the retail business but corporate credit is yet to pick up, HDFC Bank Managing Director Aditya Puri said.
Retail credit has picked up, it is corporate credit which is still to pick up, Jaitley had said after the meeting.
“And, therefore amongst the challenging situation which came up in order to improve the economy and consequently the health of the banks also picks up with that,” the Finance Minister said.
