Surplus liquidity, coupled with the forward guidance by the Reserve Bank of India (RBI), has facilitated monetary transmission and there has been a complete pass-through of policy rate cuts to fresh rupee loans and term deposit rates of banks since March 2020, the central bank said in its bulletin for September, released on Thursday.
The median term deposit rate eased by 152 basis points (bps) through March 2020 to August 2021. A bigger dip of 181 bps is discernible across shorter-tenor deposits of maturity of up to one year, the RBI said in its monthly State of the Economy report. Since March 2020, the one-year median marginal cost of funds-based lending rate (MCLR) of banks has softened cumulatively by 100 bps, the report said.
At the same time, as on September 10, currency in circulation grew at its slowest pace of 9.4% since November 2017, down from 22.4% a year ago. The trend mirrors subdued precautionary demand in contrast to the surge recorded a year ago during the first wave, the RBI observed.