However, the sharp drop in the yield on the benchmark bond—nearly 110 bps over the last eight months—has resulted in a fall in yields and rise in volumes in the corporate bond market. Ostensibly, banks are not too perturbed at some of the action having shifted to the bond market; it’s possible they are participating in some of the issuances. This is not to say there is full transmission since the base rate—the rate to which the bulk of the loans are pegged—has barely moved. That’s because the demand environment is sluggish and therefore a cut is unlikely to deliver a strong demand for loans; in other words, there will be no jump in volumes to compensate for the loss in price. Moreover, at a time when the clean-up process isn’t over and sizeable provisions need to be made for impaired loans, lenders are unwilling to give up even a rupee. It must be remembered that bigger lenders can always lure a corporate customer, if they so wish, by giving up a part of the spread. Banks need to be prodded into lowering the base rate because that could resuscitate smaller companies badly in need of a break. It’s possible that a repo cut might prompt them to do so, but one can’t bet on it.