With banks turning stingy in passing on RBI's rate cuts to consumers, rate of home loans has fallen by only 0.26 percentage point since 2015, but corporates have managed to bring down their borrowing cost by 1.44 percentage point by tapping bond markets, as per the central bank.
With banks turning stingy in passing on RBI's rate cuts to
consumers, rate of home loans has fallen by only 0.26 percentage point since
2015, but corporates have managed to bring down their borrowing cost by 1.44 percentage
point by tapping bond markets, as per the central bank. Between January 15,
2015 and April 5, 2016, Reserve Bank reduced the repo rate by 150 basis points,
but in response to this, the banks have lowered their benchmark lending rates
by only 60 basis points, according to Reserve Bank's annual report for 2015-16.
Between December 2014 and June 2016, home loans dropped by just
0.26 per cent to 10.76 per cent in June 2016 from 10.50 per cent in December
2014.
During the same period, corporates' borrowing became cheaper by
144 basis points.
Corporates' borrowing from shortest maturity commercial papers
dipped to 6.54 per cent in June 2016 from 7.98 per cent during December 2014.
Corporates are borrowing at a cheaper rate through issuance of commercial
papers, RBI said, while adding that there was a surge in public issuances of
corporate bonds in the fiscal year 2015-16.
In the second half of the year, following the September
reduction in the policy repo rate and again towards the close of the year,
yields of top-rated AAA corporate bonds eased, following g-secs (government
securities) yields.
The corporate bond yields also declined following easing of
g-secs yields during 2016-17 so far (up to August 2016).
"Taking advantage of low yields vis-a-vis bank lending
rates, corporates raised more resources from the bond market in recent
period," RBI stated.
According to RBI, banks are not passing on the benefits of rate
cuts to customers to protect their earnings.
So far in the financial year 2016-17, there has hardly been any
transmission of a reduction in the policy rate to the actual lending rates
charged to customers, stated the report.
RBI said banks might have been loading a higher credit risk
premia on their new customers in order to attain their desired return on net
worth in a rising NPA environment.
Lenders are also charging a higher strategic risk premia on
their riskier loans as part of their business strategy to reorient their
lending operations towards less risky activities, it said.
