RBI Focuses on Rate Cut Transmission, Deposit Rates

Mumbai, Dec 5 (PTI) Governor Sanjay Malhotra on Friday said the transmission of policy rate cuts to lending rates for borrowers will be a key focus for the Reserve Bank going ahead.

He also said that there is a likelihood of moderation in deposit rates going forward, and urged people to look at the real rate for putting their money into savings instead of the absolute number, which may seem low.

"Having reduced the policy repo rate by a further 0.25 pc, we have to now concentrate on the monetary policy transmission," he told reporters at the customary post-policy review briefing.

The central bank has cut rates by 1.25 per cent over the year, responding to the needs of the economy and the space created by the cooling down of inflation.

The governor pointed out that the RBI expects deposit rates to moderate further.

"...we do expect that going forward, especially after this rate cut, deposit rates will to some extent moderate," he said.

Malhotra said the low inflation helps a depositor earn more from a real perspective, as the inflation deflator is very low.

"We have to be looking at the real interest rates. When the inflation is so low and going forward as well, it is going to be low, then even though the nominal interest rate may seem to be low, the real interest rates today are quite high," he said.

On the lending side, Malhotra said the RBI does not expect bank credit growth to double the GDP growth, pointing out that it was so before FY12 and the system amassed a huge quantum of dud loans in the process.

Replying to a specific question, Malhotra said the central bank has received a communication from the capital markets regulator Sebi to permit banks to trade commodity derivatives, and is studying the same.

However, he was quick to point out that making any change will require amendments in the Banking Regulation Act, and added that a similar move was shot down over eight years ago.

Meanwhile, Deputy Governor Swaminathan J said that there has been a 0.08 per cent uptick in the slippages from the unsecured loans category in the September quarter, but added that the same does not change things from a systemic perspective.

Unsecured personal loans constitute less than 17 per cent of the banking system's advances, and the RBI is not planning any regulatory measures because of the uptick.

Giving an update on the central bank digital currency or e-rupee, Deputy Governor T Rabi Sankar said India has 80 lakh users on the pilot platform, who have done 12 crore transactions of Rs 28,000 crore in value.

The RBI's focus will be on increasing the use cases for the currency from here on, he said.

Meanwhile, on the issue of unclaimed deposits, Deputy Governor S C Murmu said there is a reduction of Rs 100-150 crore in the overall quantum every month, and the Reserve Bank expects more progress on the back of focused steps on the same.