The Reserve Bank of India Deputy Governor H. R. Khan on Thursday expressed hope that banks would pass on the entire benefit of the cut in the key interest rate.
“Different banks are looking at different ways. I think (monetary) transmission will happen and it will happen over time,” he said at National Financial Inclusion Conference.
RBI slashed its benchmark short-term lending (repo) rate by 0.50 per cent in its fourth bi-monthly monetary policy review last week but banks have not passed on the rate cut benefit to customers.
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Most of the banks have cut their benchmark lending rate by 0.25 per cent. Following rate easing by RBI, only State Bank of India (SBI) reduced its benchmark lending rate by 0.40 per cent.
Asked about review of interest rate on small savings, he said, “The secretary, Economic Affairs, and others have mentioned that they are looking at reset period. There was a suggestion to link the rate to G-sec of comparable period.”
Government is looking at that and they will probably do, he said.
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“One reason for the (delay in) monetary transmission is small savings rate,” Mr. Khan added.
With regard to levy of charges on electronic payments, he said government had come out with discussion paper. “I think Cabinet note is being moved. There are few game changing suggestions,” he said, adding that it is being considered to knock off convenience fee charged for e-payments.
“On merchant discount rate also, they are working on some rationalisation,” he said. There is also talk on tax breaks and fiscal incentives that the government is considering, he said.