The monetary authority, Reserve Bank of India (RBI) said that the banks have not responded to the central bank's move on rate cut in an expected manner.
On Monday, April 6th RBI said that despite of the several measures taken to ease the situations, banks have not taken action to the extent they should have in reply to the policy rate cut along with inflation touching close to zero.
RBI Governor D Subbarao said, "The response of banking system (to the policy actions) has been positive...but banks are yet to respond as much as warranted by the policy,"
Although many banks have revised down their prime lending rate (PLR) after the recent cut by the RBI in its key policy rates. In the latest move, RBI cut the repo rate - rate at which banks borrow from RBI - to 5% while the reverse repo rate - rate at which banks park funds with RBI - was slashed down to 3.5%.
However and Indian Banks Association Chairman T S Narayanasami has recently said that banks are likely to cut down their lending rates by 50 basis points.
Since October 2008, RBI has been taking measures by moderating policy rates to control inflation and ease liquidity in the system.