Monetary Policy in India: Transmission to Bank Interest Rates

Author/Editor:

Sonali Das

Publication Date:

June 23, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides new evidence on the credit channel of monetary policy transmission in India. Using stepwise estimation of vector error correction models, the analysis finds significant, albeit slow, pass-through of policy rate changes to bank interest rates in India. There is evidence of asymmetric adjustment to monetary policy: the lending rate adjusts more quickly to monetary tightening than to loosening. In addition, the speed of adjustment of deposit and lending rates to changes in the policy rate has increased in recent years.

Series:

Working Paper No. 2015/129

Subject:

Bank credit Banking Central bank policy rate Deposit rates Financial services Money Prime rates Repo rates

English

Publication Date:

June 23, 2015

ISBN/ISSN:

9781513598796/1018-5941

Stock No:

WPIEA2015129

Pages:

33

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