....The ecosystem too has done a bad job of eliminating the misconception that base rates have to dance only to the Reserve Bank of India (RBI) policy rate tune; instead, they depend on overall costs of doing business for the bank. Those of us with longer memories will recollect the furore caused by high bank lending rates when inflation dipped sharply to low single digits after the Asian crisis (remember oil at $10?) and after the tech meltdown (January-May 2002 inflation was 1-2%). Real rates (rates minus inflation) were an outrageous 10-15%. However, banks were helpless and the regulator too grudgingly acknowledged that with the mountain of bad loans that banks were sitting on, lowering rates meaningfully was a tough task...........
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