The central bank said it is considering a new market-linked benchmark for the purpose
The Reserve Bank of India
(RBI) on Wednesday expressed unhappiness over the fact that banks have failed
to pass on the entire benefit of its rate cuts to the costumers.
Hinting at taking reins in its hands as far as regulating the
lending rates of banks are concerned, the RBI said that it was unsatisfied with
the MCLR (Marginal Cost of funds based Lending Rates) and was considering a new
market-linked benchmark to ensure a better transmission to the borrowers.
The RBI has been repeatedly complaining about banks not doing enough
to pass on the full benefit of its rate actions to the borrowers in spite of
introduction of the MCLR and rate cuts. The RBI believes that proper implementation
of these policy changes will revive the sagging private investment for economic
growth.
RBI governor Urjit Patel on Wednesday said banks have been selective
in their rate cuts in aggressive segments like home and auto loans, but there
are many other segments, especially those where borrowers are still tied to the
base rate, where they can do more.
"Given the liquidity conditions prevailing and that we have
reduced policy rates by substantial amount since start of easing cycle, I think
there is scope for banks to reduce lending rate for those segments. So far,
they have not benefited to the full extent of our policy rate cuts", he
said.
"The experience with the MCLR system introduced in April 2016
for improving monetary transmission has not been entirely satisfactory,"
RBI Deputy Governor Viral Acharya told reporters after the apex bank announced
its third bi-monthly monetary policy review for 2017-18.
He said the Reserve Bank has constituted an internal study group
across several clusters on "various aspects of the MCLR system and to
explore whether linking of the bank lending rates could be made direct to
market determined benchmarks going forward". This group will be submitting
its report by September 24 this year, he added.
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