New Delhi: The government on Tuesday expressed hopes that banks will cut prime lending rates in response to the Reserve Bank of India’s move to reduce key policy rates by 25 basis points (bps).
“The Reserve Bank has been monitoring the economic situation and ... reduced the policy rates by 25 basis points ... This is a reiteration of the signal from RBI to banks and the credit market,” Department of Economic Affairs secretary Ashok Chawla told reporters here.
He said the central bank will continue to see what needs to be done and the RBI “is signaling or continues to signal if there is scope for softening of interest rate”.
The RBI on Tuesday slashed the short-term lending rate (repo) and borrowing rate (reverse repo rate) by 25 bps to 4.75% and 3.25%, respectively, signaling that banks should reduce their prime lending rates (PLRs).
However, the cash reserve ratio (CRR) of banks has been retained at 5.0% along with the bank rate at 6%. The stance of monetary policy 2009-10 is to ensure credit expansion at viable rates.
Also, the central bank said that it will maintain a monetary and interest rate regime supportive of price stability and financial stability taking into account the emerging lessons of the global financial crisis.