Home / Industry / Banking /  RBI governor to meet PSU banks' chiefs today, may discuss rate transmission

Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das will meet heads of public sector banks on Tuesday as the central bank looks to push greater transmission of policy rates.

According to two public sector bank chiefs, Das is expected to discuss transmission of repo rate cuts into lending rates, stressed assets and credit growth by these banks. This follows Monday’s meeting of the bankers with finance minister Nirmala Sitharaman.

“While the meeting with the finance minister focused largely on credit growth and the micro, small and medium enterprise (MSME) segment, the governor will take stock of the lending rate scenario and stressed assets," said the first banker quoted above.

He said most banks have linked their retail lending rates to an external benchmark and even lowered the marginal cost of funds-based lending rates (MCLR). The central bank has cut its key policy rate by 135 basis points since the beginning of this year in five consecutive rate cuts. While four rate cuts have been of 25 basis points each, the central bank used an unconventional 35-bps cut in August.

To improve transmission of interest rates, RBI, on 4 September, asked banks to link their lending rates on floating rate loans to retail, personal and micro, small and medium enterprises (MSME) borrowers to an external benchmark from 1 October.

Mint reported on Monday that Sitharaman said efforts are being made to ensure that large corporate release their dues to micro, small and medium enterprises (MSME) ahead of Diwali. After a review meeting with heads of public-sector banks (PSBs), Sitharaman, at a press conference, said banks have been asked to provide bill discounting facility to MSMEs against payments due from large corporates.

According to returns filed by large corporates, as much as 40,000 crore is due to the MSME sector, Sitharaman said.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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