India’s high fiscal deficit is a concern because it doesn’t allow banks to lower the rate at which it lends to borrowers, Reserve Bank of India Governor Duvvuri Subbarao said Saturday. The central bank had cut its key lending rate in March to help revive economic growth, but banks didn’t pass the reduction to borrowers. If the fiscal deficit remains high, banks may be reluctant to reduce the lending rates, even if the central bank were to cut the policy rates, Mr. Subbarao said.
