the reserve bank of india governor is at pains to explain that the 50 basis points cut in repo rate is not a gift that he is doling out but only a response to the changing macroeconomic environment in an interaction with the media the governor speaks on why the investment cycle in india should start picking updemands for a rate cut have been coming up regularly was todays action an outcome of those demands pleading for a rate cut has happened before we need to look at the state of the economy and what is going on there there has been pleading there have been demands and there have been threats everybody and his uncle has a theory on how to run the economy and what the rbi should be doing there are savants and idiot savants available to give you advice so we hear a lot of advice there are people who say interest rates should be zero there are people who say cut your lending rates and raise deposit rates ultimately the credibility of the bank is at stake and we have to take a viewis not reduction in interest rates on deposits and small savings antipoor it is not an antipoor measure as rates have been brought down after inflation is brought down the real interest rate is significantly higher than what investors would have got earlier what people do not realize that they were getting 10 at a time when interest was 11 today even if they are getting 8 with inflation at 55 they are getting real returns of 25 so real returns have gone up from negative for most of five years to positiveis there any assurance that banks will pass on rates what we have tried to do is maintain a balance we are trying to get the real interest rates to 152 and add to that the risk premium that deposits have over inflation banks have to pass on the lower rates we have had an announcement from the government earlier today and i have no doubt that the passthrough will happenyou had earlier said that lower interest rates would prevent real prices from falling would that not happen now there was a statement on why dont we allow teaser loans my response was that you can look at that but do not look only at cutting interest rates to promote real estate activity cutting prices will also promote real estate activity one of the effects of lower interest rates is to potentially increase demand in an interestrate sensitive sector another way to increase demand is to cut prices my sense is that both will have to operate to clear the backlog in real estaterbi has called for compensation to psu banks for undertaking the jandhan yojana what kind of compensation do you think is needed it is important that a banks activities be commercially remunerative otherwise banks will not want to do it they will have to constantly do it