RBI has done a fair job in cutting rates, will push demand: FM

Hopes that the banks will pass on the benefit to borrowers to help boost demand and growth

Finance minister Arun Jaitley on Thursday said the Reserve Bank of India (RBI) had done a fair job by reducing interest rates over a period of time and hoped that the banks would pass on the benefit to borrowers to help boost demand and growth.

"The banks are now in the process of passing over (rate cut benefits). Only a part of it has been passed over. So, as interest rates go down, the possibility of people going in for housing will increase. As far as automobile sales are concerned, they are on the rise," he said.

The minister hoped that in the ensuing festive season, auto companies will roll out more models and the overall demand will pick up. RBI has lowered interest rates by a total of 1.25 per cent since January, but banks are yet to pass on the entire rate cut benefit to borrowers.

"I must say to the credit of RBI that RBI has done a fair job. Over the last 12 to 13 months, 125 basis points have been cut... Everybody has to concede that RBI has done well. Now, what they do in the future will depend on how the inflation targets are met and I think we must trust their judgment," Jaitley told CNBC TV18.

The minister said the likelihood of falling short in terms of revenue collection is going to be "very marginal" as indirect tax revenues would exceed Budget estimates.

On growth prospects, he said: "I'm anticipating a good rate of growth, we will probably cross last year's figure and compared with what's happening in the rest of the world, it is going to be significantly higher."

He said rural demand is an area of concern as the monsoon has remained below normal for two consecutive fiscals.