Mumbai: Since the policy rate cuts began in February 2019 that got accelerated after the onset of the pandemic, both new as well as old borrowers have benefited from the monetary policy transmission to the tune of 217 bps and 170 bps respectively, Reserve Bank Governor Shaktikanta Das said on Friday.
Policy transmission is the central bank terminology for banks passing on the benefits of rate cuts by lowering their lending and deposit rates for both new and old borrowers, which, however, is still titled in favour of new borrowers.
Between February 2019, which was Das’ first policy announcement when he cut the repo rate by a modest 25 basis points (bps) to 6.25 per cent, and July 2021, the central bank has slashed the key policy interest rate or repo rate by a full 250 bps to 4 per cent, Das told reporters at the customary post-policy presser.
His predecessor Urjit Patel had left the interest rate at 6.5 per cent in the December 2018 policy after he began rate hikes early into his days in the RBI.
Das began the rate cut cycle in February 2019. On May 22, 2020, at an unscheduled announcement, the RBI slashed the repo rate by 40 bps to help shore up the economy amid the COVID-19 crisis.
Das had earlier reduced the rate by a hefty 75 bps on March 27, 2020 at the first monetary policy meet since the onset of the pandemic.
The governor said the RBI has been closely monitoring the pace of policy transmission, especially since October 2019 when it mandated all banks to set an external benchmark for their fund cost and loan pricing.
Between February 2019 and July 2021, both the new and existing borrowers have seen their interest cost come down by 217 bps and 170 bps respectively, while the RBI has lowered the repo rate by 250 bps, he said, adding there has been tangible transmission of rate cuts. —PTI

KR Desk