In Surprise Move, India’s Biggest Banks Slash Lending Rates


Two of India’s largest banks surprisingly slashed their base lending rate on Tuesday following remarks by the country’s central bank chief that they’d have to do more to spur lending.

The State Bank of India and mortgage lender HDFC Bank cut their base rate from 10% to 9.85%. It is unlikely that the Reserve Bank of India (RBI) is going to cut rates any time soon, and Reserve Bank of India governor Raghuram Rajan said as much on Tuesday. As a result, India’s biggest state-run and private banks will have to make their own moves.

The responsibility for stabilization policy in low-income emerging markets has increasingly fallen on their central banks. Rajan’s given his colleagues a chance to play that role for themselves.  For Rajan, easing monetary policy and aggregate demand from borrowers — known as monetary transmission — does not necessarily automatically translate into credit growth. The financial structure of countries like India are more susceptible to local bank practices…

In Surprise Move, India’s Biggest Banks Slash Lending Rates

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