Subbarao may press banks to cut rates in meet tomorrow

Ahead of the annual monetary policy, Reserve Bank Governor D Subbarao will meet heads of leading Indian banks here tomorrow to discuss the emerging situation in the banking industry.

The Governor is likely to ask the banks to ensure adequate credit flow to productive sectors such as small and medium enterprises (SME), besides further reduction in banks' lending rates, the head of a leading public-sector bank told PTI here.

"The Governor is likely to advise banks that they should ensure adequate credit flow to needy sectors. That apart, he may also ask (them) to examine the possibility of further reduction in lending rates," the bank chief said.

Despite the Reserve Bank cutting the key rates several times, banks are yet to fully respond to the policy signals "as much as (the situation) warranted," Subbarao had said yesterday.

The RBI may also take feedback from the banks about the government's borrowing programme, the burden of which will be primarily on the state-run banks.

Government borrowing is expected to be substantially higher this fiscal due to the stimulus packages announced.