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More rate cuts by banks on anvil, says Jaitley

Jaitley addresses media

New Delhi:  EMIs of home, auto and other loans are likely to come down further with Finance Minister Arun Jaitley today saying that banks have promised greater rate cuts in the coming days and weeks.

After discussing a host of issues like transmission of rate cuts, problems of higher bad loans and health of the economy with heads of state-owned banks, the Minister told reporters that financial services secretary would look into projects held up for want of funds and exuded confidence that soon economy would move to higher growth trajectory.

The government, Jaitley said, would also consider favourably the demand of PSU banks for more capital infusion, over and above what was earmarked in the budget for 2015-16.

As regards the transmission of rate cuts by the Reserve Bank, the Minister said the banks gave detailed presentation on how each one of them reduced their lending rates.

“Some part of it (rate cut) have been passed on to customers, while some banks have not passed on. I feel over the next few days … some of the bankers felt that over the next few weeks, they would be in a position to work out greater cuts,” the Minister said.

Some banks, Jaitley said, expressed their inability to pass on the rate cuts on account on problems with their respective balance sheets and higher rates on small savings schemes.

However, he said that “the environment was optimistic. Since the movement in the banking sector appears to be for the better, this gives up a further hope of a greater recovery as far as economy is concerned.”

Many banks, including the market leader SBI, had cut interest rates after RBI reduced repo (lending) rate by 0.25 per cent in its second bi-monthly monetary policy on June 2. RBI since January had reduced the repo rate by a total of 0.75 per cent in three tranches.

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