Rate cut needed
There is mounting expectation in the market of a cut in the policy rate in the upcoming monetary policy meeting, on April 5. Apropos of the report “High interest rates will make economy sluggish: Jaitely” (FE, March 29), it is evident that the government also desires reduced lending rates. Considering the imperative to push investments, the banking regulator may go for a cut. However, the transmission of a cut of 125 bps by banks last year was partial. Banks could not pass on the rate cuts, thanks to the rising volume of stressed assets. Currently, bank earnings are not viable enough to withstand the impact of a cut. As such, banks have to look for significantly augmenting fee-based income by introducing customised tech-savvy products and services.
VSK Pillai, Kottayam
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