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Will commercial banks now pass on policy rate cuts?

Having now cut its repo rate by 150bp since January 2015, the RBI yesterday re-emphasised the need for commercial banks to boost lending by passing on rate reductions to borrowers. In truth, high levels of bad debt mean that the banking system needs large-scale capital injections and arguably privatisation. The onus here lies with the government. But the RBI still has some other tools available to improve the monetary transmission mechanism.

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