Das also says that today the system is hugely surplus in liquidity, and if banks have liquidity issue RBI will provide support to them
Reserve Bank of India (RBI) governor Shaktikanta Das expects banks to pass on the rate cuts announced by the central bank during 2019 to borrowers quickly.
The central bank has cut repo rate thrice by a total of 75 basis points during this calendar year. But the full transmission of rates is yet to happen. So far, banks have passed on only 21 bps to the customers.
Das said this while addressing the media in the national capital after the customary post-Budget meeting with finance minister Nirmala Sitharaman.
"In the last Monetary Policy Committee meeting (on June 6). I had said that, and by that time 50 basis points of repo rate cut had been announced, out of this 21 basis points had been transmitted. One positive thing that is happening now is, earlier it used to take six months for transmission, now the transmission is taking a much shorter period of 2-3 months," Das said.
"After that RBI announced another 25 basis points cut on June 6, taking the total repo rate cut during 2019 to 75 basis points," he said.
Das also said that today the system is hugely surplus in liquidity, and if banks have liquidity issue RBI will provide support to them.
The Budget had announced a 10% backstop for banks to implement NBFC package as part of a series of steps to give relief to NBFCs facing cash crunch following the collapse of IL&FS.
On the current situation of the NBFC sector, the governor said the RBI is monitoring NBFCs based on their size and their past repayment behaviour.
"We are monitoring their operations very closely and at regular intervals," he said.
On the impact of fuel price hike announced in the Budget on inflation, Das said it will take time for transmission to happen.
The FM has announced a Rs two per litre hike in fuel by hiking excise duty, and road and infrastructure cess.
"There could be a marginal increase, but it's not like that it will get reflected in inflation the next day. There is a time lag," he said.
On the Budget announcement to infuse Rs 70,000 crore in the government-run banks, Das said it is a very positive development because it not only enables banks to maintain the capital they need to comply with the regulatory requirements but also gives them enough capital to step up their lending and credit disbursement, which augurs well for the banking system.
On the overseas sovereign bonds, Das said the central bank will discuss the issuance of sovereign bonds with the government.
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