20 Feb 2015
RBI warns against ‘lazy banking’ culture
FXStreet (Mumbai) - The Reserve Bank of India (RBI) has criticized the country's commercial banks for failing to implement interest rate cuts through the financial system.
Only three of India's 45 commercial banks have cut base lending rates since the central bank's governor Raghuram Rajan surprised markets by reducing the key rate to 7.75% from earlier the 8%, as well as the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0% to 21.5%
The behaviour of India's commercial banks is hurting efforts by the RBI and the government to encourage business investment. The overnight cash rate surged to as high as 26% in February, while it should have closely tracked the RBI's 7.75% repo rate.
The central bank has said that banks reduce the effectiveness of RBI monetary policy measures, as the cheaper rates for banks are not being passed on to retail and corporate borrowers and Governor Rajan has described such a culture as "lazy banking."
Only three of India's 45 commercial banks have cut base lending rates since the central bank's governor Raghuram Rajan surprised markets by reducing the key rate to 7.75% from earlier the 8%, as well as the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0% to 21.5%
The behaviour of India's commercial banks is hurting efforts by the RBI and the government to encourage business investment. The overnight cash rate surged to as high as 26% in February, while it should have closely tracked the RBI's 7.75% repo rate.
The central bank has said that banks reduce the effectiveness of RBI monetary policy measures, as the cheaper rates for banks are not being passed on to retail and corporate borrowers and Governor Rajan has described such a culture as "lazy banking."