After RBI's second surprise rate cut in as many months, bankers today hinted at lowering lending rates, but stressed monetary policy gets transmitted with a lag.
"Since there is a lag effect for monetary transmission, the effect of the previous 0.25 per cent cut together with the present reduction would accentuate banks to review their base rates," Indian Banks Association (IBA) Chairman and Indian Bank chief T M Bhasin said.
Country's largest bank SBI also hinted at a review of its base rate or the minimum rate of lending.
"Our bank will take an appropriate call of a cut in the base rate by looking at all evolving circumstances," State Bank of India (SBI) Chairperson Arundhati Bhattacharya said.
Largest private sector lender ICICI Bank's Managing Director and Chief Executive Chanda Kochhar welcomed the rate cut, but did not say whether she will pass on the lower cost of funds to borrowers.
Repo cut is a welcome step that demonstrates RBI's comfort with the inflation outlook and its responsiveness to emerging indicators, Kochhar said.
"It also reflects the number of institutional reforms and policy measures outlined in the Budget, which lay the foundation for sustainable growth," she added.
The cut should help move the economy forward on a positive growth path, Kochhar said further.
"With the government embarking on a path of qualitative fiscal consolidation and the formal adoption of inflation targeting, inflation trajectory is expected to stay benign and will aid banks in their decision making," Bhattacharya said.
Reserve Bank Governor Raghuram Rajan, who has been critical of banks for not passing on the benefits of a rate cut in the past, reiterated that lenders tend to be faster in raising rates than cutting rates.
Terming it as an asymmetric relationship, Rajan said the RBI will examine if there are any constraints in passing on cuts.
