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RBI does not expect government to cut small savings rate now

CREDIT POLICY

The Reserve Bank of India Governor Bimal Jalan said on Monday he did not expect the government to cut rates on small savings schemes administered by it immediately.

"It is up to the government to decide on a savings rate cut. I do not expect one now," Jalan told reporters.

Interest rates on government-administered small savings are used by commercial banks to set rates on their long-term deposits.

Earlier, the central bank's mid-year review of monetary and credit policy for 2001-02 cut banks' cash reserve ratio in two stages to 5.50 per cent from 7.5 per cent.

The bank rate, used by commercial banks to price their loans, was lowered to 6.5 per cent from seven per cent.

The RBI said there was limited scope for banks to lower their lending rates, citing large levels of bad loans with banks, their high operating expenses and the returns on small saving schemes as some of the hurdles.

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