Lending rates go up despite RBI rate cuts

Mumbai: Despite the Reserve Bank making credit cheaper, lending rates are rising for borrowers after accounting for inflation and falling economic growth, a foreign brokerage said on Monday.

The weighted average lending rate in the system is up 0.08 per cent since April, economists at Bank of America Merrill Lynch said in a report.

Economic growth has fallen to a six-year-low of 5 per cent in the June quarter and is widely expected to slip further with almost all key components of the economy contracting or falling since the first three months.

The RBI has responded by cutting rates by 110 basis to a nine-year-low of 5.40 per cent since April courtesy low inflation.

The RBI has been blaming banks for slower transmission of its policy moves into their lending rates and continuously nudging them to cut more, so that credit pick up can increase to help the broader growth.