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FM asks banks to pass RBI rate cuts to borrowers
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SME Times News Bureau | 12 Jun, 2015
In a meeting with heads of commercial banks here on Friday, Finance
Minister Arun Jaitley on Friday asked banks which have not passed on to
borrowers the interest rate cuts made by the Reserve Bank of India (RBI)
this year to do so over the next few weeks.
A finance ministry
release after the meeting said that Jaitley "asks the chief executive
officers of both the public sector and private sector banks to effect a
corresponding rate cut of 75 basis points in response to RBI's rate cut
of same basis points since January 2015".
"There was a
presentation made by each bank on the RBI rate cuts of 25 basis points
each. Some banks have not passed on the rate cuts. I hope over the next
few weeks they will be in a position to reduce rates," Jaitley told
reporters here after the meeting.
"The banks expressed problems
in their balance sheets. They also asked us to take a relook at the
small saving schemes, which with their high rates at 8.5 to 9 percent is
pushing up their deposit rates," he said.
"The banks said that
when the repo (RBI's short-term lending rate) rate was raised, they were
slower to raise their interest rates, and now they are also slower to
bring them down," 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.
At
a post-review press conference earlier this month, Reserve Bank
Governor Raghuram Rajan made it clear that he would like to see the
commercial banks passing on the rate cuts down the line.
After
RBI's April review, Rajan had said banks have to pass on the previous
rate cuts, and dismissed claims that cost of funds remained too high.
Jaitley
also said the finance ministry will, over the next few weeks, prepare a
list of projects stalled due to lack of finance to set in motion the
process of their revival and thus bring down the non-performing assets,
or distressed loans, of banks.
"Many stalled projects have
started. The secretary, department of financial services, in
consultation with others, will prepare a list of projects stalled
because of finance," he said.
"We will deal with these stalled
projects directly. We will call representatives of state governments, of
the projects and the departments concerned over the next few weeks," he
said.
As per the ministry's Economic Survey brought out in
February, stalled projects as on December-end amounted to Rs.880,000
crore-worth.
On NPAs, Jaitley noted that "in the fourth quarter
of January to March 2015, NPAs had come down from 5.64 to 5.2 percent.
But, as I've said earlier, one quarter doesn't indicate the pattern... I
would like to wait".
Noting the heads of banks said they would
take another two to three quarters to reach "a somewhat greater level of
comfort" on NPAs, he said that "banks will have to make greater effort
to reduce NPAs and those with higher levels were asked to explain the
reasons for it".
Gross NPAs of state-run banks have gone up to Rs.260,531 crore as in December 2014.
On
the demands of state-run banks for greater capital infusion, Jaitley
said there is a merit in their case and the government will consider it,
adding that the final decision will be taken by the cabinet.
The
finance ministry statement said all public sector banks have been asked
to make presentations in the matter to the department of financial
services in the presence of Minister of State Jayant Sinha and the
department secretary in the next three weeks.
The government has
earmarked Rs.7,900 crore in Budget 2015-16 for infusing capital in
public sector banks. The RBI had earlier said the amount was
insufficient and required to be enhanced.
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