The response of deposit and lending rates of commercial banks to the cumulative 110 basis points reduction in the policy repo rate during the easing cycle of monetary policy starting from February 2019 has been muted so far, according to the Reserve Bank of India’s monetary policy report.
Monetary transmission has remained staggered and incomplete, it added.
While the weighted average lending rate (WALR) on fresh rupee loans decreased by only 29 basis points (February-August 2019), the WALR on outstanding rupee loans, in contrast, increased by 7 basis points (bps) over the same period. One basis point is equal to one-hundredth of a percentage point
“The inadequate transmission essentially reflects the slow adjustment in bank term deposit rates. This, in turn, reflects the long maturity profile of bank deposits at fixed interest rates,” the report said.
This story is from the October 05, 2019 edition of The Hindu Business Line.
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This story is from the October 05, 2019 edition of The Hindu Business Line.
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