Cheaper loans: RBI Governor Shaktikanta Das for linking lending rates to repo

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Updated: August 20, 2019 11:23:08 AM

The RBI governor was speaking at Fibac 2019, an annual event organised by the Federation of Indian Chambers of Commerce & Industry (Ficci) and Indian Banks’ Association (IBA).

More transmission, RBI, repo rate, loan rate, Shaktikanta Das,NBFC, economy news, rbi, IBA, ficciThe RBI governor said the central bank was batting for growth and re-assured the markets it was keeping a close watch on inter-linkages to ensure financial stability.

The central bank is looking to formalise policies to link loan rates to an external benchmark like the repo so as to speed up transmission, Reserve Bank of India (RBI) governor Shaktikanta Das said on Monday. The multiple cuts in the key repo rates — aggregating 110 basis points in 2019 so far — have not translated into proportionate cuts in loan rates. Das said a time may come “when we may need to formalise this arrangement”.

The governor asserted the central bank was batting for growth and re-assured the markets it was keeping a close watch on inter-linkages to ensure financial stability. “It is our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust,” the governor asserted.

He, however, ruled out an asset quality review (AQR) of NBFC books along the lines of that done for banks in 2015-16. “At the moment, there is no such proposal to have an AQR. While saying that, let me also add that the top 50 NBFCs and HFCs are being very closely monitored by us and all aspects including capital adequacy, stability and cash inflow-outflow are being monitored,” the governor said.

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The RBI governor was speaking at Fibac 2019, an annual event organised by the Federation of Indian Chambers of Commerce & Industry (Ficci) and Indian Banks’ Association (IBA).

Exhorting the industry to not be so despondent and instead to look out for opportunities, Das took exception to the prevailing gloom, calling on the industry to take a more optimistic view of the situation. “When I read newspapers or watch business television, the mood is not sufficiently positive and optimistic,” he observed.

Acknowledging the challenges at home and abroad as also the fact that India could not live in isolation, the governor said the mood today ranged “from existential angst to a positive attitude”.

So far, SBI, Bank of Baroda (BoB) and Union Bank of India (UBI) have announced plans to link their home loan rates to the repo rate. UBI also plans to link vehicle loan rates to the repo.

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