Letters: Clamour for rate cut

Banks hitherto have been following the concept of base rate for fixing interest rates for loans. The Reserve Bank of India (RBI) has recently advised all scheduled commercial banks to replace their base rates with marginal cost of funds based lending rate (MCLR) with effect from April 1, and set lending rates on loans and advances with reference to the MCLR of bank. Accordingly, banks have decided to shift to the MCLR system for charging interest rates on loans and advances.

In a bid to quell inflation, growth has been taking the back seat for quite some time. Pressures are building up now from different quarters for a rate cut by the RBI to give a boost to investment and prop up growth. The level of inflation has also moderated considerably over time. All these factors should hopefully lend the required level of comfort and clarity to the RBI for a further rate cut soon.

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The RBI is due to announce the first bimonthly monetary policy for 2016-17 on April 5. A cut in the key policy repo rate by 25 basis points should be an obvious thing to expect. But, the RBI governor has a knack of surprising the market each time and there should be no surprise if the central bank looks beyond a rate cut even by 50 basis points.

Srinivasan Umashankar, Nagpur

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