The Reserve Bank of India (RBI) has reduced the repo rate by 50 basis points. I am sure the industry and business world will welcome this move and demand a proportionate reduction of lending rates by commercial banks too. And it is quite possible that most of the commercial banks will oblige and reduce their base rates.
However, the plight of one group of customers seems to be overlooked - that of the the depositor. It is quite natural that when the banks reduce their lending rates, in order to maintain the interest spread they will definitely reduce the interest rates on deposits too. Else their profitability will be affected adversely. But such reduction of interest rates on deposits will adversely affect the common man, especially the senior citizens who may be depending on the bank interest for their sustenance, that too when there is no respite from inflation. Shouldn't the government and the RBI consider this too and build some mechanism to reduce the plight of these people? Banks should at least consider not to reduce the interest on deposits from senior citizens and unemployed people.
For that matter one would like to know how many banks borrow from the RBI for lending, so that the cut in repo rate can be passed on to the customer. Those banks that do not borrow from the RBI need not pass on the reduction to the customers.
B C U Nair Kerala
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