RBI-effect: After HDFC Bank, SBI, ICICI Bank slash interest rates, more banks to follow

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Updated: April 8, 2015 10:01:34 AM

According to a DBS Bank official, benefits of easier monetary policy have yet to reach the real economy.

HDFC Bank, HDFC Bank rate cut, SBI rate cut, ICICI bank, ICICI bank interest rate cut, Chanda Kochhar, Raghuram Rajan, RBI monetary policy, RBI monetary policy review, rbi monetary policy 2015, rbi monetary policy rates, Reserve Bank of India, RBI Inflation, Business news“Interest rates can be expected to come down as the policy measures already taken reflect in banks’ cost of funding,” said ICICI Bank MD Chanda Kochchar. (PTI)

Bankers on Tuesday said interest rates are expected to come down as the past rate cuts by the Reserve Bank of India (RBI) will lead to a decline in cost of funds for banks – HDFC Bank, State Bank of India (SBI), by 15 bps each, and ICICI Bank, by 25 bps, have already cut interest rates in the wake of Governor Raghuram Rajan laying the blame squarely on banks for RBI keeping repo rate and CRR unchanged in the latest monetary policy review.

“Interest rates can be expected to come down as the policy measures already taken reflect in banks’ cost of funding,” said ICICI Bank MD Chanda Kochchar.

Reacting to Governor Raghuram Rajan‘s status quoist policy, VR Iyer, chairperson & managing director, Bank of India, the impact of reduction in cost of deposit experienced during the last quarter will encourage banks to pass on the benefit to customers. “Retail borrowers may see lower EMIs,” she said.

TM Bhasin, chairman, Indian Banks’ Association, said, “After front loading two repo rate cuts in quick successions, the RBI has taken a pause to assess the effects of its action in the economy in general and banking sector in particular.  To nudge banks to effectively transmit monetary policy signals, a pitch is made to move over to marginal cost for base rate computation.”

“To encourage banks to reduce base rates the RBI will issue guidelines on the use of marginal cost of deposit in the base rate calculations. The impact of reduction in cost of deposit experienced during the last quarter will encourage banks to pass on the benefit to customers. Retail borrowers may see lower EMIs,” Iyer said.

According to a DBS Bank official, benefits of easier monetary policy have yet to reach the real economy.

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