RBI's Swaminathan J Explains Why Transmission Isn't Fully In Place | RBI Policy | NDTV Profit - video Dailymotion

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#RBIPolicy | Lower proportion of bank loans set to the external benchmark-linked lending rate is one of the reasons for incomplete transmission of rate hikes, says #RBI Deputy Governor Swaminathan J.   Read: https://bit.ly/3HNNE9H

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00:00 As far as the transmission in a hiking phase, as we have always seen in the past, the rates

00:05 on deposit side, the resets much faster and they get passed on and as we have seen deposit

00:12 rates have almost played out. While on the lending side, it does take time to pass for

00:17 two critical reasons in our assessment. There are two major reasons. One is that the proportion

00:26 of loans that are benchmarked externally, what we call EBLR linked loans, is still less

00:33 than 50%. So where the transmission could be instant is only where the EBLR comes into

00:40 play. In case of other instruments, other benchmarks like MCLR or base rates or fixed

00:46 rate loans, it does take time to transmit. So that is the precise reason why we still

00:51 see that transmission is fully not in place. The second also in a hiking phase, we have

00:57 seen banks in their anxiety to maintain their market share in the incremental credit also

01:03 adjust their margins so as not to lose their market share in the incremental credit. So

01:08 that also impedes a complete transmission in terms of the effective interest rate. So

01:13 I hope it has been understood from the context of these two parameters.

01:17 [Music]

RBI's Swaminathan J Explains Why Transmission Isn't Fully In Place | RBI Policy | NDTV Profit

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