Thursday, March 26, 2009

The problem of bank spreads

One of the biggest challenges before the RBI is to get the banks to pass on the benefits of the repo rate cuts to borrowers by way of lower lending rates. It now appears that India is not the only country grappling with the problem of high spreads between lending and deposit rates. Russia and especially Brazil have much the same problem. It has become so acute in Brazil that the government was reportedly considering directing state owned banks to take over some small private banks and lend at lower rates.

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