Subbarao hopes banks will cut lending rates
Chhaproh (Himachal Pradesh): The Reserve Bank Governor D Subbarao Tuesday expressed hope that banks would lower their lending rate in response to the recent cut in the CRR-- the percentage of deposits banks have to keep with the central bank.
"We hope that there will be response from banks and the new rates will go down so that there is credit flow for productive sector," Subbarao, who was here in connection with an outreach programme, said.
Following the CRR cut by the Reserve Bank of India, the country's largest bank State Bank of India (SBI) reduced the minimum lending rate by 0.25 percent last week.
With the reduction, the base rate of the bank came down to 9.75 percent, the lowest in the banking sector.
It is a challenge for banks to keep the lending rates low, Subbarao said.
Last week, Reserve Bank reduced CRR by 0.25 percent but refrained from reducing lending rates in view of high inflation.
The RBI decision released Rs 17,000 crore of primary liquidity into the system.
The liquidity infusion, RBI had said, would ensure adequate flow of credit to productive sectors of the economy.
Following the cut, CRR will come down to 4.5 percent while the repo rate, at which the central bank lends to the banks, would remain unchanged at 8 percent.