New Delhi: Government think tank Niti Aayog Vice Chairman Rajiv Kumar on Friday said banks are in a position to pass on interest rate cut benefits to the consumers and the industry.
The Reserve Bank of India (RBI) had on February 7 announced a repo rate cut of 25 basis points, and so far State Bank of India (SBI) is the only bank to have followed it with a small rate cut of 5 basis points.
"Credit growth has perked up and will increase further, so banks are in a position to pass on the benefits of a rate cut," Kumar said at an event.
He said the government had to struggle through NPAs in the banking sector.
"We inherited a banking sector with NPAs worth Rs 10.5 lakh crore. But now that struggle seems to be over and the banking sector is looking up again indicating that the interest rate cut be passed on for the growth of the economy," said Kumar.
Speaking at the event, Punjab National Bank (PNB) MD and CEO Sunil Mehta said, "Deposit rates are our sources of funding. The moment this funding goes down, we won't be able to serve our customers."
On Thursday, Reserve Bank Governor Shaktikanta Das had met CEOs and MDs of public and private sector banks to persuade them to pass on benefits of lower interest rates to the consumers.
But the banks expressed their concerns on protecting margins to provide for the NPAs and banking operations, which, they said, may be hit if they start passing on the full rate cut to consumers, without any headroom.