Reserve Bank of India Governor Shaktikanta Das on Monday said he would be holding a meeting with the heads of all banks to discuss the issue of transmission of rate cuts by the central bank to the actual loans being disbursed by the banking sector.
Earlier this month, the RBI had cut the benchmark interest rate by 0.25% to 6.25%, but only a few banks have so far cut the interest rates on their loans following the move.
“Transmission of rates is very important, especially after the central bank announces a rate cut,” Mr. Das said at a press conference following the RBI Board’s meeting with Finance Minister Arun Jaitley.
“As already stated in our post-Monetary Policy Committee press conference, I am having an interaction with the CEOs and MDs of the banks, both public and private sector, which is now scheduled to be on February 21,” Mr. Das added. “We will discuss that issue with the banks and see what needs to be done.”
Speaking on further consolidation of the banking sector and the mergers of banks, Mr. Jaitley said that the economies of scale available to bigger banks was useful.
‘Fewer banks needed’
“I think India needs fewer and mega banks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as the banking sector is concerned, are of great help,” Mr. Jaitley said.
The Finance Minister also said that the revenue growth over the last five years had been strong, which had allowed the government to finance social sector schemes in a way that was difficult in the preceding years.
“Year after year, our experience in the last five years has been that there has been a reasonably high growth as far as revenues are concerned,” Mr. Jaitley said. “Earlier, governments were finding it difficult to accommodate even ₹28,000 crore for MGNREGA. Today it is possible to accommodate ₹60,000 crore.”
Mr. Jaitley further said that although the PM-KISAN scheme catered to land-holding farmers, there were a number of government schemes aimed at the weak and underprivileged, including landless and tenant farmers.
“You have MGNREGA, which applies to a lot of them,” he said. “Then you have a lot of schemes in the government, because the expenditure on rural Awaas Yojana, rural sanitation, rural electrification, is all being done to the advantage of those who are really weak and underprivileged.”
RBI to inject ₹12,500-cr.
The Reserve Bank of India (RBI) on Monday said it would inject ₹12,500 crore into the system through purchase of government securities on Thursday to increase liquidity. The purchase will be made through open market operations (OMOs).
(With PTI inputs)
