RBI Urges Swift Rate Cuts for Effective Policy Transmission
A recent RBI report emphasizes the need for banks to swiftly reduce lending rates in line with the central bank's policy rate cuts. The June Bulletin article outlines that financial conditions are favorable for efficient rate transmission, urging banks to align their lending practices accordingly.
- Country:
- India
The Reserve Bank of India (RBI) has called on banks to expedite the reduction of lending rates, following the central bank's policy rate cut of 50 basis points earlier this month. This move is aimed at ensuring that the benefits of the rate cuts are effectively transmitted to borrowers across the nation.
In its June Bulletin, the RBI highlighted that financial conditions remain conducive for effective rate transmission, commending several major banks, such as SBI, Bank of Baroda, and HDFC Bank, for promptly adjusting their lending rates in line with the policy changes.
Besides the substantial repo rate reduction, the RBI has also decreased the cash reserve ratio by 100 basis points, a measure designed to infuse primary liquidity of around Rs 2.5 lakh crore into the banking system by December 2025. This addition is expected to reduce borrowing costs and facilitate monetary policy transmission.
(With inputs from agencies.)
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