Now Come Time Of Lower Bank Interest

The Reserve Bank of India (RBI) has put the onus on banks to lower borrowing costs for companies and individuals as it said that they have not reduced their lending rates commensurate to the magnitude of the rate cuts effected by the central bank.According to ET’ Addressing the media soon after the monetary policy announcement, RBI governor Urjit Patel made a case for banks to cut lending rates. “There is still scope for lending rates to come down since our policy rates have come down by 175 basis points since January 2015 while the weightage average lending rates have fallen by 80 to 85 basis points,“ Urjit Patel said in response to a question on whether he expects banks to lower lending rates. On Wednesday , RBI kept policy rates unchanged at 6.25%. This comes as good news for small-ticket borrowers such as home buyers, students and farmers. These comments from Patel come at a time when a number of banks have sharply reduced the marginal cost of lending rate or MCLR ­­ the floor rate at which they lend to their best borrowers post-demonetisation.SBI lowered MCLR by 90 bps from 8.9% to 8% from January 1. “I don't know which bank the governor is referring to. But SBI has lowered MCLR by 200 bps which is much more than RBI's 175 bps cut,“SBI chairman Arundhati Bhattacharya told ET. She said that going forward, banks would adjust deposits rates depending on the outflow of deposits (due to lifting of cash withdrawal limit) and credit pick up. However, most banks have not cut base rate (the floor lending rates) and nearly 50% of the loans book is priced on base rate.