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Home  » Business » RBI move will encourage banks to cut rates: Finmin

RBI move will encourage banks to cut rates: Finmin

Source: PTI
March 05, 2009 13:20 IST
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The government said the Reserve Bank's slashing of the policy rates will provide impetus to the banks to cut interest rates and even private sector lenders will lower lending rates 'sooner or later.'

"We welcome the decision. This will provide adequate impetus to banks to lower their interest rates. Private banks will sooner or later will follow suit," Economic Affairs Secretary Ashok Chawla told reporters in New Delhi on Thursday.

On Wednesday, the RBI cut short-term lending and borrowing rates -- Repo and Reverse Repo -- by 50 basis points each, while keeping the other key tool -- Cash Reserve Ratio -- intact. CRR is the proportion of deposits that banks have to keep with the central bank.

Chawla said there was no need to cut CRR since there is enough liquidity. Pointing out that policy rates have been cut whenever the situation has arisen, he said the RBI will take further decisions as and when situation unfolds.

The RBI had also said on Wednesday, 'It is expected that reduction in policy rates will further encourage banks to provide credit for productive purposes at viable interest rates. The Reserve Bank on its part would continue to maintain ample liquidity in the system.'

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