Mumbai: Banks' interest rates will come down as and when inflation falls, said Reserve Bank of India Deputy Governor K.C. Chakrabarty on Thursday.
Inflation based on wholesale price index was 6.95 percent in February, up from 6.55 percent in January. RBI has projected inflation to be around 7.0 percent by March end.
When asked if home loan rates would come down, Chakrabarty said that a reduction in banks' base rates would bring home loan rates down.
He was speaking on the sidelines of an event hosted by YES Bank.
Many banks have offered home loans at cheaper rates under special schemes valid up to Mar 31. Under these schemes, the spread between home loan rate and the base rate has been reduced. Most banks' base rates are currently 10.50-11.00 percent.
Chakrabarty said that banks must improve their productivity and efficiencies by adopting technology to reduce costs and thereby reduce interest rates.
He reiterated that banks must reduce their interest margins and aim for more efficient ways to do business.
On rising non-performing assets of banks, Chakrabarty said the situation is not alarming and banks will be able to manage their bad loans.
"There are concerns, banks have to improve their ability to manage their NPAs. They have to improve their information system," he said.
The economic slowdown has resulted in many companies opting for corporate debt restructuring and banks have been hit hard due to rise in bad loans.
Most banks' gross non-performing assets are 3.00-3.50 percent of total loans.