The Reserve Bank of India (RBI) Governor Shaktikanta Das has questioned all the public sector banks (PSBs) for not reducing their lending rates despite liquidity is in surplus, bond yields being at a multi-year low, and policy rates being lowered by 75 basis points (bps) in the past six months.
Das told PSB executives during a meeting, as per the sources that, “Bond yields have come down, policy rates have fallen, the borrowing cost for banks is low, as is evident from softening rates on certificates of deposit (CD), and liquidity is in surplus. I am surprised banks are still not lowering lending rates.”
As per the statement on the apex banks website, the governor has a discussion on credit and deposit growth owing to a slowing economy.
He said,” Even as credit growth remains muted, the flow of credit to the needy sectors should not be hampered while following prudent lending, robust risk assessment and monitoring standards.”
Sources said the governor had a word of caution for the retail segment. Since all banks are now devising their growth strategy focusing on retail, which is a small sub-set of the overall, banks need to be cautious and retail growth should be in sync with the risk policies set by individual bank boards, Das said, adding that risk monitoring and assessment should be robust for retail loans.
The governor also nudged banks to lend to non-banking financial companies (NBFC), instead of remaining risk-averse, since NBFCs are dependent on bank loans.
Das said that ” the recent initiatives to address issues relating to NBFCs and the role banks can play in mitigating lingering concerns.”
(Source Business Standard)