Markets were expecting a rate cut; onus now on banks to pass on the benefit

Given the severity of the situation due to the Covid-19 pandemic, the timing of rate transmission holds great significance.

The Reserve Bank of India's (RBI) decision to lower the repo rate by 40 basis points (bps) to 4 per cent on Friday is indeed a positive and welcome step. Both the government and the RBI are doing everything that is required at this crucial juncture to help stem the economic fallout of the Covid-19 pandemic.

However, the issue is whether this reduction in rate is passed on by the banks to the industries and other segments. As seen earlier as well, the transmission of interest rate cut to the end consumer has been slow. Hence, we need to watch