Jaitley likely to ask banks to pass RBI rate cuts to borrowers

New Delhi, June 11 (IANS) Following his meeting with Reserve Bank of India Governor Raghuram Rajan, Finance Minister Arun Jaitley is expected to take up the matter of banks passing on the central bank’s earlier rate cut benefits to borrowers when he meets heads of public sector banks on Friday.

The meeting on Thursday was the finance minister’s first meeting with the governor after the RBI, last week, reduced its short-term lending rate from 7.5 percent to 7.25 percent.

“These are all usual meetings which we have. Nothing special. Broad range of issues were discussed. Lot of issues were discussed,” Rajan told reporters after the meeting.

“We have voiced whatever we had to say at the monetary policy,” he added.

In three separate cuts this year, the RBI has reduced the repo rate, at which it lends to commercial banks, by 0.75 percent. But not all the banks have passed on the benefit of lower interest rates to customers.

“Our policy is neither too conservative, nor too aggressive — but just right for the given moment,” Rajan said at a post-review press conference, and made it clear that he would like to see the commercial banks passing on the rate cuts down the line.

In April, Rajan said banks have to pass on the previous rate cuts, and dismissed claims that cost of funds remained too high.

Jaitley’s meeting with bank heads on Friday will also review the banks’ credit offtake and the progress made under the Jan Dhan Yojana and other social security schemes, an official source told IANS.

The source said the finance minister would also take up the issue of non-performing assets (NPAs), or distressed loans, and discuss ways to contain these.

Gross NPAs of state-run banks have gone up to Rs.260,531 crore as on December 2014.

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