Transmission is happening well: RBI guv

Malhotra hints at allowing foreign banks to own 26% in Indian banks

- BS REPORTER

The interest rate cuts since February have been transmitted well to lending rates, and any future reduction in policy rates will depend on the growth and inflation outlook, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Tuesday.

He also indicated that the regulator might allow foreign banks to own up to 26 per cent stake in Indian banks.

Following a cumulative 50-basis-point (bp) rate cut between February and May, Malhotra said the transmission to new loans had been 24 bps until May, while it was 16 bps for outstanding loans.

"I reviewed the figures (on transmission) recently and I would like to inform you that transmission is happening well," he told CNBC-TV18.

In June, the RBI's six-member rate-setting panel cut the policy repo rate by another 50 bps, bringing it down to 5.5 per cent. While announcing the rate cut in June, the central bank shifted its policy stance to neutral.