Oct 04, 2016 10:17 PM IST | Source: CNBC-TV18

Inflation targeting govt's priority, RBI shares same view:Lavasa

Post the monetary policy meet today, Ashok Lavasa told CNBC-TV18 that inflation should remain in control in the coming days and expects banks to pass on the rate cut to its borrowers.

"Determining interest rates is a function of the banks autonomous operations (and) different banking institutions take a call on how to price their product," says Finance Secretary, Ashok Lavasa.

Post the monetary policy meet today, Lavasa told CNBC-TV18 that inflation should remain in control in the coming days and expects banks to pass on the rate cut to its borrowers.

Below is the verbatim transcript of Ashok Lavasa's interview to CNBC-TV18's Sapna Das.

Q: Is inflation targeting a top priority for RBI?

Lavasa: Inflation targeting is priority for the government and RBI has also shared this approach. On the whole, the range which has been agreed to between the RBI also by the government of India is similar.

We are witnessing right now that the CPI inflation has come down and it is expected that the kind of developments which have taken place now, inflation should remain within control. The RBI has also recognised this in their policy statement.

Q: So, this rate cut was not a surprise so to speak?

Lavasa: There are different expectations always in the market. As I said any policy which is formulated by the supreme financial regulator in the country does take into account the expectations as well as the realities that prevail in the market. I think the regulator always tries to find the right balance between what the market expects and what ground reality will permit.

Q: There is also another flipside of the coin, in the sense that post this rate cut - generally in the past also it has been found that banks have been very slow in passing on the rate cuts, the transmission process doesn\\'t really reach the end consumer. Is there going to be a difference in the approach, are we expecting anything on that front? How do we try and address this issue if at all it needs to be addressed?

Lavasa: Expectation is that individual banks will also follow suit in cutting the interest rate again as a part of market expectation. Being active financial intermediaries it is for the banks to take a call on what is their assessment of what prevails in the market as well as take a look at their own internal situation and to what extent they would like to take the signal which the RBI has given and create a conducive environment.

Q: It is generally observed that on deposits the rate cuts happen pretty quick but in terms of the lending rates we don't really hear much about that.

Lavasa: Determining interest rates is a function of the banks autonomous operations. Different banking institutions take a call on how to price their product. As I said all the banks, I would like to believe they take a decision keeping in view what prevails in the market and what is their assessment of the demand and to what extent they can meet that demand.

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