Finance minister P Chidambaram wants commercial banks to reduce lending rates in response to the easing monetary policy stance of the Reserve Bank of India (RBI).
While the RBI reduced the policy repo rate three times this year since January, banks have not passed on the rate cut to customers in terms of lowering interest rates on lending.
The repo rate is the rate at which RBI lends short term money to banks and it currently stands at 7.25 per cent. The 7.25 per cent rep rate is the lowest since May 2011.
Chidambaram asked commercial banks to translate monetary policy to retail borrowers and firms through lower lending rates.
High interest rate affects the auto and the realty sectors the most with auto sales across the industry slumping and real estate sector struggling to pick up.
India’s headline inflation in March fell to its lowest in more than three years at 5.96 percent, but the consumer price index remained elevated at 10.39 percent.
Meanwhile, corporate India and financial market players are awaiting the outcome of the next monetary policy meeting of the RBI on June 17.
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