Banks will surely cut lending rates for borrowers: Jayant Sinha

NEW DELHI: A day after the Reserve Bank of India cut the repo rate by 25 basis points for the second time in two months, the finance ministry has asked banks to step up to the occasion and pass on the rate cuts to consumers or face the possibility of an intervention from the government which owns a majority stake in over two dozen public sector banks.

Minister of state for finance Jayant Sinha told All India Radio on Thursday that if the banks do not pass on the benefit of reduction in repo rates to the consumers, the government may take steps against them.

"In a competitive market, once the rates start coming down, few banks will do it and others will have to follow it," he said, stressing that there is no such competitive behaviour in these markets and the government will make sure that they operate efficiently and in a pro-competitive manner. Indicating greater tax benefits for the working class in the years to come, Sinha defended the Budget for 2015-16 and said it paid adequate attention to the middle class.

"The fiscal situation is not very good as of now, but as its capacity improves, the government will pass on the tax benefits," he told the national radio broadcaster.

"In this Budget, the government has enlisted 20 major reforms and it will definitely have a huge impact on the Indian economy in the future," Sinha said. The junior finance minister’s remarks about acting against banks if they don’t transmit rate cuts to borrowers, assume significance as the government had in January indicated that it will grant greater operational autonomy to public sector banks with a rider that they stop their lazy lending practices.

"Banks would be run professionally, and there would be no interference. But accountability is essential. The government has no vested interest, and public sector banks can derive strength from this fact," the Prime Minister had told bankers assembled at a two day retreat with the government in Pune this January.

The Prime Minister had called for an end to lazy banking, and asked banks to take on a proactive role in helping the common man, at the Gyan Sangam retreat that was attended by Reserve Bank of India governor Raghuram Rajan and top finance ministry officials.