This refers to the recent cut in repo-rate by Reserve Bank of India by 50 basic points, aimed to give relief to the loan takers. It is not uncommon that banks and non-banking financial companies to not pass the benefit of repo rate cut to the existing loan takers.
Significantly, in case of a hike in the repo rate by RBI, banks instantly burden existing loan takers through increased interest rates. The RBI should ensure that benefits of the repo rate cut are immediately passed on to existing loan takers.
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 a higher rate of interest for the same type of loan. A free economy must not mean that people are taken for ride by multinational banks which are acting just like the East India Company of yore.
likewise, interest rates on deposits of different types of bank deposits should also be uniform. At least the public sector banks must have uniform interest rates for deposits and loans, as was the system in yesteryears, without going for unnecessary competition amongst themselves.