SME Times News Bureau | 12 Oct, 2020
The transmission of policy repo
rate changes to deposit and lending rates have improved since April,
said a report by the Reserve Bank of India.
The Monetary Policy
Report for October 2020 noted that the decline in both the lending and
deposit rates is more pronounced for foreign banks.
"The
transmission of policy repo rate changes to deposit and lending rates of
banks improved since the April 2020 MPR (Monetary Policy Report). The
weighted average lending rate (WALR) on fresh rupee loans declined by 91
bps since March 2020 in response to the reduction of 115 bps in the
policy repo rate and comfortable liquidity conditions," it said.
"The
pass-through to WALR on fresh rupee loans was higher than the softening
of yield on 5-year corporate bonds (79 bps) and yield on 10-year G-Secs
during March-August 2020. The WALR on outstanding rupee loans declined
by 46 bps during this period, but this transmission is an improvement
over the earlier period."
The report said that of the 105 basis
point reduction in the weighted average domestic term deposit rate
(WADTDR) on outstanding rupee deposits during the ongoing easing cycle
(since February 2019), a little over half of the decline, 59 bps
occurred since March 2020.
The one-year median marginal cost of
funds-based lending rate (MCLR) charged by public sector banks and
private sector banks declined further during the first half of the
financial year 2020-21, it added.