Base rate could go down by 50 bps if banks follow RBI guidelines - Moneylife

Base rate could go down by 50 bps if banks follow RBI guidelines - Moneylife

My VIEW:

The clamour for 'rate cut by RBI' by those who are the beneficiaries of bank credit is based on the expectation that reduction in repo rate will have an impact on banks' lending rate. As interest rates now stand deregulated, reduction in lending rates by banks will be preceded by reduction in deposit rates. This will be the position until banks are able to work with lesser margins. The calculation of loss on reduction in lending rates is an arithmetical exercise. The question is whether the possible reduction in deposit rates has been accounted while assessing the possible 'one time loss' in 2017.

M G Warrier

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