RBI to transfer ₹28,000 crore interim dividend to Centre
After the board’s meeting with Jaitley, RBI governor Shaktikanta Das told reporters that he would meet heads of commercial banks on Thursday to discuss passing on the benefit of lower policy rates to the consumer.
A lower interest rate should, in theory, attract investors and boost growth.
In its monetary policy review on February 7, RBI announced a surprise 0.25 percentage point cut in the rate to 6.25%.
“Transmission of rates is very important especially after central bank announces a rate cut,” Das told reporters in New Delhi.
Commercial banks have not passed the entire benefit to their consumers as they lowered their lending rates by only five basis points. One basis point is onehundredth of a percentage point.
Pointing at the “benign” inflation outlook, after the Monetary Policy Committee (MPC) meeting on February 7, Das said that it was vital to act “decisively and in a timely manner” to address the objective of “growth”. According to RBI, the primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth.
“Interim surplus means a final amount of dividend is not yet decided and this is an ad hoc amount. It was something expected and also budgeted,” EY India chief policy advisor DK Srivastava said.
Speaking about the banks not passing the full benefits of RBI’S policy rate cuts, Srivastava said, “Lower interest rate will certainly stimulate the economy and accelerate the growth. But, it is a commercial decision of the banks and the RBI’S role is advisory. Governor can just make an appeal”.
Finance minister Jaitley also said on Monday that India needs fewer and mega banks that are strong. An alternative mechanism headed by the finance minister in September last year had decided the amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank to create a combined business of ₹14.82 lakh crore. The government had merged five associate banks of SBI and the Bharatiya Mahila Bank with India’s biggest public sector bank in 2017.