Finance minister Jaitley nudges PSU banks to cut rates
Finance minister Arun Jaitley on Wednesday nudged banks to reduce interest rates, urging them to pass on the benefit of the 50 basis points repo rate cut this year by the Reserve Bank of India (RBI), to the customers.business Updated: Mar 11, 2015 23:15 IST
Finance minister Arun Jaitley on Wednesday nudged banks to reduce interest rates, urging them to pass on the benefit of the 50 basis points repo rate cut this year by the Reserve Bank of India (RBI), to the customers.
On March 4, the central bank reduced the repo rate — the rate at which banks borrow from it — by 25 basis points. Earlier in January, RBI had reduced it by a similar 25 basis points.
He was speaking at a meeting to review the quarterly performance of public sector banks and financial institutions which was also attended by representatives of RBI, SIDBI and NHB, among others.
“The meeting was productive and the finance minister asked banks to see how the benefit of the recent repo rate cuts can be passed on to customers,” a public sector bank chief who attended the meeting said.
Some of the banks, however, said they would wait till RBI’s next bi-monthly monetary policy review on April 7 before taking any rate cut decision.
“Coming April, after seeing RBI monetary policy statement, banks can start considering reduction in the rate,” Bank of India chairman V R Iyer said after the meeting.
“The transmission will definitely take place... Banks also have to keep asset quality in mind. That is a guiding factor for any bank to reduce lending rate,” Iyer added.
Jaitley asked banks to focus on raising credit offtake, which would be critical to fuel economic growth. He underlined the need to facilitate appropriate credit expansion to meet the needs of productive sectors.
Promising financial autonomy, Jaitley asked heads of public sector lenders to take commercial decisions without fear or favour. The government will allow each bank to adopt its own strategy for raising capital, he said. “CEOs of banks and financial institutions (should) take commercial decisions without fear or favour as the government is committed to providing them financial autonomy both in letter and spirit.”
The issue of lending targets for small and medium enterprises was also discussed. It is critical for banks to meet the lending targets for the MSME sector, especially for the successful implementation of the ‘Make in India’ programme.
Jaitley said he expected banks would show the same resolve, as they did in opening no-frills savings accounts under the Pradhan Mantri Jan Dhan Yojana, in containing the slide in financial performance parametres including credit growth, profits and stressed assets.