I am glad the government has decided to link the rates on small savings to government bond rates, but these rates will continuously have to be examined to ensure they do not form a high floor below which banks cannot cut deposit rates. All in all, bank lending rates have moved down, but not commensurate with policy rate cuts.
These changes denote recognition of the constraints of bilateral payment systems. While the Reserve Bank does not advocate walking away from some of the well-established and low-cost bilateral systems we have, we can see a strong case for any new architecture that is established to meet emerging needs to be based on centralised architecture; that is, a hub and spokes, rather than bilateral, model.