FM wants banks to slash lending rate after RBI’s action

Discusses credit flow in meeting with PSB chiefs

New Delhi: Union Finance Minister Nirmala Sitharaman gestures during a press conference to announce the fifth and final tranche of economic stimulus package, at the National Media Centre in New Delhi, Sunday, May 17, 2020. (PTI Photo/Atul Yadav) (PTI17-05-2020_000060A)

Hours after the Reserve Bank of India (RBI) reduced interest rates, Finance Minister Nirmala Sitharaman conveyed to public sector banks in no certain terms that the government expected banks to reduce lending rates, which was required to kick start the economy.

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The Finance Minister met the chief executives of PSBs over video-conferencing in a pre-scheduled meeting to review credit flow to productive sectors of the economy.

“The FM wants interest rate transmission. She wanted banks to cut rates as quickly as possible so customers are benefited,” said the chief executive of a public sector bank who attended the meeting. “The Finance Ministry is aware that transmission of interest rates has not happened fully,” the official told

The Hindu . Bankers said lending rates are set to come down after Friday’s RBI rate cut. Some of the large lenders, including SBI, convened a meeting of the asset-liability committee to take a view on the interest rates.

According to bankers, the FM tried to understand the ground situation as far as lending was concerned, and wanted to ensure that the loan guarantee scheme for MSMEs reached all entities needing it.

“Since March 1, banks have sanctioned ₹6 lakh crore of loans. Our bank has sanctioned ₹15,000 crore, of which ₹12,000 crore has been disbursed. Over 1.36 lakh customers have been benefited,” said A.K. Goel, MD and chief executive officer of UCO Bank.