Banks will surely cut lending rates for borrowers: Jayant Sinha

A day after RBI cut the repo rate, the government said banks will "slowly" but surely will reduce lending rates for borrowers.

Minister of State for Finance Jayant Sinha also said the government has reduced the fiscal deficit that has led to reduction in interest rates by RBI. "We have created space for reduction in interest rates."

"Banks will slowly reduce the rates. If you look at statement of banks, they say it will happen. Give them some time. Borrowing rate will reduce. Nothing happens overnight in economy. I assure you that interest rates will come down in the coming times," he said.

In its second surprise cut within two months, RBI yesterday had slashed repo rate by 0.2% to 7.50%.

Welcoming the RBI move, Sinha had said yesterday that EMIs should come down significantly and the rate cut would provide near-term boost to the economy.

Also Read: RBI rate cut: Your EMIs may come down only next fiscal

On the monetary policy arrangement with RBI, the Minister said: "We have put together a monetary policy with the RBI which is going to engage for flexible inflation targeting, which is a very important and a landmark arrangement between the Ministry of Finance and the Reserve Bank of India on the monetary policy."

Sinha said, "This has cheered the markets. It reassured the markets that we are going to manage inflation going forward."

"We have created space for reduction in interest rates," he said, adding that government has helped reduce the fiscal deficit that has led to reduction in interest rates by RBI.