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Know More.pdf

Rate-Cut-Article.pdf

🔗 Source: thinkcapital.in

📊 Size: 456 KB

👤 Author: Saurabh Jain

⬇️ Downloads: 91

Summary

The Reserve Bank of India (RBI) has reduced the Repo Rate by 210 basis points in the past 15 months, but the Average Marginal Cost of Funds based Lending Rate (MCLR) of Public Sector Banks has only reduced by 55 basis points, resulting in minimal transmission of the rate cut to borrowers. The MCLR is determined by four factors, including the marginal cost of funds for banks, which is heavily dependent on the interest paid on term deposits. Banks are unable to reduce interest rates on term deposits due to issues such as bad loans, liquidity, and asset-liability mismatch, leading to a minimal effect of changes in the Repo Rate on borrowing rates. However, the Global Covid Crisis (GCC) may create an opportunity for banks to consolidate and reduce interest rates in the medium term, especially if a Bad Bank is created to address the issue of bad assets.

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Description

The Reserve Bank of India (RBI) has reduced the Repo Rate by 210 basis points in the past 15 months, but the Average Marginal Cost of Funds based Lending Rate...

Technical Information

File Format: PDF
File Size: 456 KB
Pages: 5
Language: EN
Author: Saurabh Jain
Total Downloads: 91
Last Updated: 3 months ago

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