RBI grants banks freedom to set interest rates; Public sector banks raise loan rates
KOCHI: Reserve Bank Governor Shakti Kant Das announced that commercial banks now have full autonomy in setting deposit and loan rates, following the removal of interest rate controls. This development was highlighted during a press conference with Finance Minister Nirmala Sitharaman after the Reserve Bank Board of Directors' meeting.
Das emphasized that each bank can independently determine its interest rates on deposits and loans. He also noted that any potential issues related to mismatches in loan-to-deposit ratios will be closely monitored.
Finance Minister Sitharaman urged banks to concentrate on their primary functions of mobilizing deposits and disbursing loans. She expressed concern about the slowdown in investment mobilization and highlighted that domestic investors are achieving good returns in sectors like the stock market. Sitharaman called on banks to attract individual investments by developing innovative and appealing financial products.
In related news, despite the Reserve Bank maintaining the key interest rate for the ninth consecutive time, some public sector banks, including Bank of Baroda, UCO Bank, and Canara Bank, have raised their loan interest rates by 0.05%. This increase reflects the lowest marginal cost of funds-based lending rate.