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Several factors still hinder monetary transmission to bank rates: RBI
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SME Times News Bureau | 18 Jul, 2021
Although transmission of deposit and lending rates has significantly
improved in recent times, several factors continue to obstruct effective
monetary transmission to these bank rates, the Reserve Bank of India
(RBI) has said.
The RBI Bulletin for July 2021 noted that the
central bank has made several attempts to improve the effectiveness of
monetary transmission by refining the process of interest rates setting
by banks.
Noting that the recent developments in respect of
transmission to deposit and lending rates has shown improvement, it
said: "However, there are several factors which continue to impede
monetary transmission to deposit and lending rates of banks."
The
factors include mismatch of banks' assets and liabilities, competitive
pressure for small savings schemes, and assets quality of scheduled
commercial banks.
Internal benchmark for pricing of loans and
heterogenous pricing methodology of NBFCs also are factors which hinder
effective transmission of rates.
The Bulletin said that monetary
transmission in the current easing cycle, so far, has been full across
the money market segments and corporate bond market, mainly on account
of liquidity augmenting measure, including unconventional measures,
taken by the RBI.
In response to the cumulative reduction of
policy repo rate by 250 basis points, the one year median marginal cost
of funds-based lending rate of SCBs declined 155 bps during February
2019 to June 2021.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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