Cut in repo-rate : Is it advantageous for old loan-takers?

(Guinness Record Holder & RTI Activist)

Repo-rate cut is advantageous for general public only if Reserve Bank of India (RBI) ensures that banks pass on benefit to loan-takers, which is not the case in present ‘free’ economy where banks are at liberty to swallow benefits of repo-rate cut by not lowering interest-rates for old loan-takers. Rather repo-rate cut will adversely affect senior citizens because of lowering of deposit-rates.

RBI should devise and revive policy of having uniform interest rates decided by RBI itself, both for deposits and loans for all banks. Banks can compete through better service rather than through interest-rates. RBI can devise different types of interest-rates for different types of loans and deposits. Presently even different public-sector banks have different rates of interest for deposits which keeps senior citizens confused which have only source of income as interest-earning from bank-deposits.

There are huge bargains in case of loan-takers by banks. Such bargains can and should be stopped by formulating same rates of interest on loans which may be different for different types of loans both for existing and new loans. Presently banks lure new loan-takers through lower rates of interests, while old customers have to pay higher rates of interests. Free economy must not mean that people may be taken for ride by multinational banks which are acting just like ‘East India Company’ to make Indian citizens their financial slaves.