Hopes Rise over RBI’s Lending-Boosting Efforts

The Reserve Bank of India (RBI) has maintained an accommodative policy stance for well over a year now but its efforts have had a limited impact on spurring bank lending to consumers. Now, economists hope the measures announced on Tuesday will prove different.

Despite slashing interest rates by a total 125 of basis points in 2015, the RBI has been hamstrung by the limited pass-through by banks. Commercial lenders have implemented only about half of the rate cuts, blaming tight liquidity conditions and deteriorating asset quality. Non-performing loans (NPLs), or bad loans, spiked by nearly a third to $60.3 billion late last year, according to Reuters.

On Tuesday, the central bank lowered the rate at which it lends money to banks—called the repo rate—to a more than five-year low and announced new steps to prod banks to pass on the full benefits of monetary stimulus to the wider economy, revealing its commitment to the issue.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.