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    A quick look at rate cut transmission by banks under the new RBI governor

    A quick look at rate cut transmission by banks under the new RBI governor

    A quick look at rate cut transmission by banks under the new RBI governor
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    By Abhishek Kothari   IST (Updated)

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    There are a lot of complaints about slow transmission of interest rates by banks when repo rate is cut by the Reserve Bank of India. When RBI lowers the repo rate, the government presses banks to take actions on lending rates but banks are often reluctant to follow suit.

    There are a lot of complaints about slow transmission of interest rates by banks when repo rate is cut by the Reserve Bank of India. When RBI lowers the repo rate, the government presses banks to take actions on lending rates but banks are often reluctant to follow suit.
    On Wednesday, the Monetary Policy Committee (MPC) of the RBI has reduced repo rates by another 35 basis points to 5.4 per cent in the August policy review while maintaining an accommodative stance. While it is apparent that the country is facing a deepening economic slowdown, RBI Governor Shaktikanta Das also cited downside risks to global growth among other reasons for the policy stance.
    Das said a 50-basis point cut would have been excessive in the present circumstances, but said the central bank has been pre-emptive with its stance and interest rates.
    In the eight months since Das, a career bureaucrat, took over as its governor on December 12, 2018, the central bank has reduced repo rate by 110 bps. Let us see how much of this has been transmitted to the banking system.
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