Stickiness in bank domestic and lending rates While the policy rates have been substantially eased since early October 2008, some rigidity has been observed in banks’ deposit and lending rates. Banks deposit and lending rates continue to be high, albeit some easing has been witnessed in the past few months. This rigidity could be attributed to a variety of factors.
First, while headline inflation in terms of wholesale price index has seen a significant easing over the past few months (from around 12 per cent in September 2008 to 0.3 per cent by end-March 2009), it is largely due to the substantial decline in international crude oil prices and some reduction in domestic prices of administered oil products.