In its annual report, the Reserve Bank of India (RBI) has said the efficacy of the monetary policy transmission mechanism needs to improve, as the pass- through of recent cuts in policy rate to the bank lending rate has only been partial. Though RBI has cut the repo rate ( at which banks borrow from the central bank) by 75 basis points since the beginning of this year, banks have been reluctant to reduce lending rates. According to RBI, the partial transmission reflects constraints under the existing base rate system. “ Identifying the impediments in passthrough and implementing an alternative method such as marginal cost- based credit pricing or identifying an appropriate benchmark for the bank lending rate will be apriority for the Reserve Bank,” the central bank said. The report also stressed how it was crucial to develop market- based benchmarks by developing the term segment of the money market. “Liquidity support may have to be progressively provided through regular auction