RBI for faster rate transmission

Bankers say immediate deposit rate cut may not be possible due to tightness in the system

- SUBRATA PANDA & ANUPREKSHA JAIN

Notwithstanding the rate cut of 50 basis points through two moves by the central bank since February, bankers are of the view that deposit tightness in the system—resulting in competition among lenders to attract money from customers—will likely prevent them from reducing deposit rates immediately.

This comes even as Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said the central bank aimed at a quick transmission of the rate cut through the banking system.

As a result, lending rates, especially the ones linked to the marginal cost of funds-based lending rates (MCLR), are unlikely to come down immediately. However, external benchmark-linked loan rates will see an immediate transmission. "One would like transmission to happen as quickly as possible but it should not be disruptive. So, how we do that is something we will look into and we will take a call," Malhotra said at the post-monetary policy press conference.