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The logjam in rate transmission

The gap between lending rates and RBI's repo rate has reached levels only seen in crises

Neelkanth Mishra 

Neelkanth Mishra

Transmission of interest rates, or rather, the lack of it, is now in a crisis-like situation. The gap between the average bank lending rate (by this we mean the weighted average lending rate or WALR on outstanding rupee loans, as reported by the Reserve Bank of India) and the repo rate (which the RBI sets) is now the widest on record.

This gap has built up mostly in the last 15 months: Between January 2015 and August 2018, the average bank lending rate fell by the same amount as repo rate. It is since August 2018 that the bank lending rates have barely moved despite 135 basis points of ...

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First Published: Wed, November 06 2019. 00:16 IST
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