New Delhi, June 12: Finance Minister Arun Jaitley Friday, in some plain speaking with commercial banks, said he hoped that those banks that have not passed on to borrowers the interest rate cuts made by the Reserve Bank of India (RBI) this year, would do so over the next few weeks.
Keen to boost economic growth by making available cheaper capital, Jaitley met chief executives of public sector and private sector banks separately and conveyed the government’s disquiet over the lack of enthusiasm on the part of lenders.
“The finance minister asked the CEOs of both public and private banks to effect a corresponding rate cut of 75 basis points in response to the RBI rate cuts since January,” an official statement said.
“All banks unanimously expressed that in a period of two to three months, greater transmission of lower rates could be seen,” it said.
In an unusual move, top private banks ICICI, HDFC and Axis were called for discussions with the finance minister immediately after his meeting with PSU heads.
“Some part of it (rate cut) has been passed on to customers, while some banks have not passed on. I feel over the next few days, they would be in a position to work out greater cuts,” Jaitley said.
In the meeting, he asked the bank chiefs as to why the system effected a rate cut of only 25 basis points against 75 basis points effected by RBI since January. Some of the banks, Jaitley said, have expressed their inability to pass on the rate cuts on account of problems with their balance sheets and higher rates on small savings schemes.
Jaitley said, “The environment is optimistic. Since the movement in the banking sector appears to be for the better, this gives further hope of a greater recovery as far as the economy is concerned.”
A number of banks, including the largest public sector lender SBI, have cut their minimum lending rates after RBI reduced its policy rates by 0.25 per cent June 2.
At the meeting, minister of state for finance Jayant Sinha suggested that banks could sell off their non-core assets, apparently for raising capital.
Jaitley promised more capital infusion into public sector banks, saying there’s “merit” in their demand for more funds over and above what was provided in the Budget. PTI
