MUMBAI: Ignoring the clamour for an easing of monetary policy, India’s central bank kept its key lending rates unchanged on Tuesday, sticking to its stand that further cut can only be effected if commercial lenders pass on the previous reductions to borrowers.
Having cut its short-term lending rates thrice thus far in this calendar year, to bring it down to 7.25 percent, Reserve Bank of India (RBI) Governor Raghuram Rajan said a host of factors led to a status quo on Tuesday’s monetary policy update. IANS
“Since the first rate cut in January, the median base lending rates of banks has fallen by around 30 basis points, a fraction of the 75 basis points in rate cut so far,” Rajan said in the central bank’s monetary policy update at the Mint Street headquarters here.
“As loan demand picks up in Q3 of 2015-16, banks will see more gains from cutting rates to secure new lending, and more transmission will take place,” he said, adding liquidit y will not be a cause for worry since the government has decided to infuse more capital into state-run banks.