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

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam