Reserve Bank of India Governor Shaktikanta Das will meet CEOs and MDs of state-run as well as private sector banks on Thursday. The RBI governor will discuss rate transmission with the bankers and also persuade them to pass on the benefit of lower interest rates to the consumer following a key policy rate cut by the central bank recently.
"I will meet the private and public sector banks CEOs and MDs on February 21 over this because transmission of monetary policy decisions is important," Mr Das had said earlier this week during the RBI's central board meeting. "We will see what needs to be done then."
Earlier this month, the RBI cut the benchmark interest rate by 0.25 per cent to 6.25 per cent.
But PSU and private banks have not been passing on the resultant benefits of this rate cut. The RBI governor said that the central bank has received a lot of comments on external benchmarks and it is currently examining them.
The RBI is mandated to see whether banks are cutting lending rates in line with repo rates.
In fact for this purpose, the central bank will start linking interest rates to external benchmarks replacing the Marginal Cost of Funds-based lending rate (MCLR).
The home loan borrowers have often complained about the opacity of the interest rate fixing mechanism which allows banks not to pass rate cut benefits in lowering home and auto loan rates.
As and when the external benchmark rate changes, it will reflect in the change in interest rate of the loan as well.
The RBI had earlier proposed that from April 1, 2019, banks would have to use external benchmarks instead of the present system of internal benchmarks -- Prime Lending Rate, Benchmark Prime Lending Rate, Base Rate and MCLR to ascertain the lending rates.