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How RBI prices cuts have helped drive bankclean-up

How RBI prices cuts have helped drive bankclean-up

The Reserve Bank of India’s interest rate slits — 1.5 % since early last year — has helped drive yields lower, authorize banks to book treasury profits and clean upward their balance sheets, says Arundhati Bhattacharya, chairperson of SBI.

Speaking to [CNBC-TV18], Bhattacharya said higher profits would enable banks to make provisions for stressed resources and increase more loans.

Treasury gains are those that banks make on money kept in liquid securities such as g-secs.

“In reality, we had freshly written a item pointing out during the previous economic recovery cycle, 64 % of bank profits were operate by treasury gains. This time, 16 % of profits have been driven by treasury gains profit.”

Silently, she said the RBI’s accommodative pose, also with respect to its liquidity stance, would help boost monetary policy transmission.

The SBI chief joined that Raghuram Rajan’s last monetary policy review — in which he left rates unchanged — was in channel with expectations as room for a rate cut was limited. “The recent increase in vegetable rates may be seen in August CPI numbers. We believe a rate cut is possible [towards the end of the year].”

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