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The estimates of the speed of adjustment coefficients indicate that the lending rate adjusts more quickly to an increase in WACMR than to a decrease. Similarly, the estimated speed of adjustment coefficients indicate that the deposit rate adjusts downwards when WACMR falls, but not upwards to a monetary tightening.

That was from the IMF’s ‘India: Selected Issues’ March 2015 (Country Report 15/62).  Looks like more than asking the Reserve Bank of India, the government should be asking the banks to pass on rate cuts to borrowers and rate increases to depositors. The full ‘Selected Issues’ can be downloaded from here.

Perhaps, there is even a legal case here against banks for business malpractice, if it is indeed true.

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