KOLKATA: Even as Reserve Bank of India has kept the policy rates unchanged, it is expecting that the past rate cuts to play out and lead banks to cut lending rates proactively.

“We want earlier rate cuts to play out, instead of making rate cuts mechanically,” RBI Governor Shaktikanta Das said after announcing the policy stance.

The central bank is expecting higher monetary transmission since the share of base rate loans, which have remained largely sticky, has come down. The marginal cost-based floating rate loans, which have annual resets, have become due. “Credit market transmission remains delayed but is picking up,” RBI said.

RBI said the one-year median MCLR has declined by 49 basis points since February while RBI cut repo rate by 135 basis points cumulative in the same period. The weighted average lending rate (WALR) on fresh rupee loans sanctioned by banks declined by 44 basis points, while the WALR on outstanding rupee loans increased by 2 basis points during this period.

Meanwhile, monetary transmission has been full and reasonably swift across various money market segments and the private corporate bond market, RBI said. Transmission to various money and corporate debt market segments ranged from 137 bps in overnight call money market to 218 bps in three-month commercial papers of non-banking finance companies. Transmission to the government securities market has been partial at 113 bps in 5-year government securities and 89 bps in 10-year government securities.


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