Union finance minister Nirmala Sitharaman on Friday asked banks to pass on lower rates to customers after it found that lenders were not passing the benefit of the rate cut by Reserve Bank of India (RBI) to borrowers.

"This decision will see reduced EMIs for housing loans, vehicles and other retail loans by directly linking repo rate to the interest rates. Which means the moment the reduction has happened, it will directly benefit the customers," the finance minister said in a press conference.

"Banks have now decided to pass on any rate cut through the MCLR reduction to benefit all borrowers. It is a decision which the banks have made. I am very grateful to them. Irrespective of the segments, people saying that the benefits of the rate reduction don’t reach them at all or if it reaches, it reaches in trickles or if it reaches trickles last over several months and years,” the minister added.

Earlier, the RBI had stated that banks should benchmark the rates to either the RBI policy repo rate or Government of India’s 91-day or 182-day Treasury bill yields.

Follow our complete coverage of measures announced by finance minister Nirmala Sitharaman here.

First Published:Aug 23, 2019 6:44 PM IST