Money & Banking
Jaitley asks banks to pass RBI rate cuts to borrowers
Finance Minister Arun Jaitley on Friday expressed the hope that those commercial banks which have not passed on to borrowers the interest rate cuts made by the Reserve Bank of India (RBI) this year, would do so over the next few weeks.
"There was a presentation made by each bank on the RBI rate cuts of 25 basis points each from December to June. Some banks have not passed on the rate cuts. I hope over the next few weeks they will be in a position to reduce rates," Jaitley told reporters here after meeting with heads of public and private sector banks.
"The banks expressed problems in their balance sheets. They also asked us to take a relook at the small saving schemes, which with their high rates at 8.5 to 9 percent is pushing up their deposit rates," the finance minister said.
"The banks said that when the repo (RBI's short-term lending rate) rate was raised, they were slower to raise their interest rates, and now they are also slower to bring them down," he added.
Following his meeting with RBI Governor Raghuram Rajan on Thursday, Jaitley was expected to take up the matter of banks passing on RBI's earlier rate cuts.
This was the finance minister's first meeting with Rajan after RBI, last week, reduced its repo rate, at which it lends to commercial banks, from 7.5 percent to 7.25 percent.
In three separate cuts this year, the RBI has reduced the repo rate, at which it lends to commercial banks, by 0.75 percent.
"Our policy is neither too conservative, nor too aggressive -- but just right for the given moment," Rajan said at a post-review press conference, and made it clear that he would like to see the commercial banks passing on the rate cuts down the line.
In April, Rajan said banks have to pass on the previous rate cuts, and dismissed claims that cost of funds remained too high.



MG Warrier

2 years ago

It is comforting to find that the focus is shifting from forcing RBI to ‘cut’ rates again and again, there is someone responsible acknowledging the need to ensure that the effect of cuts already done reaches the beneficiary down the line, namely the borrower who deploys the credit availed for productive purposes.
It is intriguing that all the sermons from the Finance Minister are addressed to Public Sector Banks which are burdened with heavy social sector responsibilities which add to their stressed assets and draw on their resources due to the huge number of accounts(both deposits and credit) they have to service. Last week only HDFC Bank(a major private sector bank) MD said, “…I turned digital, I got into semi-urban and rural areas, I got the brand, systems and people…” Such claims make one wonder, why the share of private sector banks in banking business is not growing fast and why the FM is speaking exclusively to public sector banks when it comes to social sector or financial inclusion issues.
Back on rate cut, it has to be clearly understood that base rate cut by RBI does not directly result in reduced cost of funds for banks. That is why the deposit rates get affected first and long after, when pressure mounts, depending on market scenario, a part of the benefit is shared with borrowers by reducing lending rates.
It is necessary for all the stakeholders to reconcile to the reality that whether in public sector or in private sector the resources belong to the country and its people and government and organisations have to manage them with care.
M G Warrier, Mumbai

Reliance Jio launch by December, devices from Rs.4,000
Reliance Industries on Friday announced that its broadband services will be launched by December this year and 4G devices under its own brand name Jio will be available from Rs.4,000. The company said it has invested Rs.100,000 crore in this business.
"We are currently in the pre-launch testing and stabilization phase of this large and complex network. Over the next few months, we will initiate an extensive beta-launch involving millions of friendly customers across all our markets," chairman Mukesh Ambani told shareholders here. 
"This beta programme will be upgraded into commercial operations around December of this year," he said, adding that the company now has end-to-end initial capacity to serve over 100 million broadband and 20 million fibre-to-home customers for the Jio platform.
On devices, the chairman told the company's 41st annual general meeting that the focus has been on affordable, yet innovative smartphones, on which is dependent the penetration of this future technology.
"Jio and Reliance Digital teams have worked with all leading device manufacturers of the world to ensure availability of VoLTE (Voice-over-long-term evolution) 4G smartphones across all price points -- from ultra-premium models on one hand, to entry level models on the other," he said.
"The combination of Jio's strong initiatives and a supportive global environment, gives me the confidence that we will see VoLTE phones in India at prices below Rs.4,000 by December of this year," Ambani said.
"In our digital business, our plan is to provide the same power of computing, communication and information to every individual, whether in towns or rural areas, that the US President had ten to fifteen years ago. All this at about Rs.300 to Rs.500 per month."
The company will also offer a host of other apps and services like the Jio Chat app that has garnered over one million active users in three months. Other offerings include switch-and-walk app, Jio Drive (cloud app), Jio play, Jio beats, Jio mags, Jio news and Jio money. 
While the switch-and-walk app will allow customers to seamlessly copy everything from their old phone to a new phone, the Jio drive will enable cloud capabilities. Jio beats, Jio mags and Jio news, as their names suggest, would be digital services offering for content dissemination.
Talking about Jio Money, the chairman said: "This offering will leverage on Jio's digital network and distribution reach to acquire these untapped merchants, taxi drivers and restaurants."
"The company has also partnered with State Bank of India to apply for a payments bank license under regulations issued by the Reserve Bank of India," Ambani added.


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