RBI governor to meet bank chiefs on rate cuts this week

Reserve Bank of India (RBI) Governor Shaktikanta Das will meet the heads of public and private sector banks on February 21 to seek their views on cutting interest rates for borrowers.

On Monday, the RBI Central Board met Finance Minister Arun Jaitley for the customary post-Budget meeting in the national capital.

The RBI's Monetary Policy Committee (MPC) had cut the repo rate by 25 basis points to 6.25 per cent on February 7, and shifted its stance from 'calibrated tightening' to 'neutral' after factoring in the sliding inflation rate.

"The transmission of rates is very important when the RBI announces rate cuts," said Das after meeting Jaitley. "We are in touch with the CEOs and Managing Directors of both public and private sector banks. We will discuss the issue with them on February 21 and see what needs to be done."

The central bank had cut repo rate for the first time in 17 months. Repo rate is the rate at which the RBI lends money to commercial banks. A repo rate cut allows banks to reduce interest rates for consumers on loans, and lowers equal monthly instalments on home loans, car loans and personal loans.

The RBI has also announced a restructuring package for micro, small and medium enterprises (MSMEs) with outstanding loans up to Rs 25 crore.

"The ball now lies in the court of banks to restructure loans of eligible MSMEs as per rules and guidelines," said Das.

With the economy forecast to expand at a rate of 7.2 per cent this fiscal year, the interim Budget for 2019-20 has provided support for poor farmers and reduced tax burden for the middle class in a bid to boost consumption and growth before the general elections due in April.

The RBI has also raised the limit of collateral-free agricultural loans to Rs 1.6 lakh from the current Rs 1 lakh in a bid to help small and marginal farmers in the formal credit system.

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