Finance Minister P Chidambaram has asked banks to pass on the Reserve Bank of India's (RBI) rate cut benefit to both retail and corporate borrowers.
The central bank reduced the key policy rate thrice, by 0.25 per cent each,
so far in 2013 in its effort to boost sagging growth, which hit a decade low of 5 per cent in 2012-13.
"In fact, the RBI has already cut the
repo rate by 125 basis points since early 2012, with commercial banks cutting rates by only 30 basis points over the period," Chidambaram said at the AGM of Indian Banks' Association in Mumbai.
Chidambaram said with higher real interest rate, people will be willing to deposit more in the banks. This will allow banks to moderate deposit rates and pass on the savings through lower lending rates.
"As
CPI inflation and deposit rates fall, I would urge commercial banks to translate monetary policy to retail borrowers and firms through lower lending rates," he said.
Observing that food inflation is "still elevated", the finance minister said he hoped it will ease with arrival of Rabi crops.
"We hope that it will come down further as the full Rabi crops arrive in the market... as CPI inflation fall, I believe people will start having more disposable income," Chidambaram 0said.
The RBI expects non-food credit growth to pick up marginally to 15 per cent in 2013-14 from 14 per cent achieved in the previous fiscal and deposit mobilisation to be flat at 14 per cent.
With inputs from PTI
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