Contrary to all expectations, RBI has reduced the repo rate by 50 basis points, while the expectation was a reduction of 25 basis points only. I am sure the industry and business world will welcome this move and demand a proportionate reduction of lending rates by commercial banks too. And it is quite possible that most of the commercial banks will oblige and reduce their base rates.
However, in the entire gamut, the plight of one group of customers seems to be overlooked- the depositors! It is quite natural that when the banks reduce their lending rates, in order to maintain the interest spread they will definitely reduce the interest rates on deposits too. Else their profitability will be affected adversely. But such reduction of interest rates on deposits will adversely affect the common man, especially the senior citizen who may be depending on the bank interest for their sustenance, that too when there is no respite in the inflation. Shouldn't the government and RBI consider this aspect too and build some mechanism to reduce the plight of these people? For that matter one would like to know how many banks borrow from RBI for lending, so that the cut in repo rate can be passed on to the customer. Those banks who do not borrow from RBI need not pass on the reduction to the customers
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