Chinese rates for Mr Das.

Governor of the Reserve Bank of India (RBI), Shaktikanta Das is visiting Washington where he announced a brilliant "out of the box" suggestion that the conventional practice of changing interest rate by 25 basis points needs to be changed. "If easing monetary policy is required but the central bank needs to be cautious in its accommodation, a 10 basis points reduction in the policy rate would perhaps communicate the intent of authorities more clearly than two separate moves -- one on the policy rate, wasting 15 valuable basis points of rate action to rounding off, and the other on the stance, which in a sense, binds future policy action to a pre-committed direction," he said. No it doesn't. The Federal Reserve in the US changed its stance from raising interest rate at least twice in 2019 to no change, because of a softening of the US economy. It also slowed reduction of its balance sheet from $30 billion per month to $15 billion. Chinese interest rates varied from 6.310% to 6.560% to 5.100%, which means that the Chinese central bank does not change rates by 25 basis points. As far as citizens are concerned, what would be the benefit from a 10 basis point change in interest rate? Only the State Bank of India (SBI) has recently committed to linking its lending rate to the repo rate, set by the RBI, but only on short term loans of over Rs 100,000. Banks lend money from savings of depositors. Household savings rate has slumped to 17.2% of GDP in 2017-18, so banks have to offer higher interests to attract depositors which restricts their ability to pass on lending rate changes to customers. Why waste time by changing interest rate by 10 or 5 or 2 basis points? Because it helps the biggest borrower -- the government. By the end of January this year, the government had borrowed Rs 6.34 trillion, which was 121.5% of the budget estimate. Gross borrowing is expected to rise to Rs 7.14 trillion by 2020-21. Total government debt stood at Rs 83.40 trillion on 31 December 2018, of which 83.3% is internal debt. With such astronomical numbers, even a 1 basis point reduction in interest rate helps the government to cut its interest bill. Mr Das is a retired civil servant and was appointed as Chairman of the RBI to help the government, which he has done by reducing the interest rate in February and April. The government borrows money from the market by selling bonds of different duration. Unfortunately, yield on 10-year benchmark bonds rose to 7.5% from 7.42% after the April rate cut. It was slightly softer at 7.409% on 12 April. Mr Das is loyal to the government. The markets are not impressed.