Expecting more rate cuts by banks, Reserve Bank of India Governor Raghuram Rajan on Tuesday said that banks have passed past rate cuts into lending rates only modestly.
“Despite liquidity banks have passed on rate cut benefit only modestly,” Rajan said, adding that “as the economy improves there would be greater possibility of rate cut by banks”.
Pointing out the reasons of modest rate cuts by bank, Rajan said, “earlier some bankers said that it was the lack of liquidity that was holding rates high, now I hear from some that it is fear of the FCNR(B) redemptions that is making them reluctant to cut rates”.
“I have a suspicion that some new concern will crop up once the FCNR(B) redemptions are behind us,” he added.
Besides, in his last monetary policy review on Tuesday, Rajan said that “it has been a fantastic experience as RBI governor”.
“There are still 28 days in my term which I intend to use fully,” he added.
Rajan keeps key interest rates unchanged in his last monetary policy