The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Write an original pass-through calculation and ask what additional evidence would support a causal interpretation. A pass-through percentage describes arithmetic without identifying all competing causal influences. An original checkpoint is: What proportion of the stated policy-rate change appears in the quoted lending-rate change? Supported answer: 60%. Explain the decisive fact, then alter one condition and solve again. This is an original practice method, not a claim that the question appeared in an official past paper.
02 / UNDERSTANDING
The concept in context
Transmission is neither instantaneous nor mechanically identical across borrowers, instruments or economic conditions. A useful study check is to draw the policy-to-spending transmission sequence, then separate pass-through arithmetic from causal evidence. Explain why the method fits the stated facts before applying it to a changed situation.
03 / UNDERSTANDING
A worked learning case
In a hypothetical example, a policy rate falls by 0.50 percentage points, while a sample lender’s quoted rate falls from 10.00% to 9.70%. The quoted-rate change is 0.30 percentage points. This illustrates partial pass-through in the selected quote, while saying nothing by itself about every loan, the timing of spending or the eventual inflation response.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
What proportion of the stated policy-rate change appears in the quoted lending-rate change?
Show the answer and reasoning
60%.
The quoted lending rate falls by 0.30 percentage points and the policy rate falls by 0.50 percentage points. Dividing 0.30 by 0.50 gives 0.60, or 60%. This arithmetic describes one illustrative comparison; it is not an estimate of economy-wide transmission or proof that the policy change alone caused the quote movement.
Two traps to watch for.
- Assuming every lending rate moves immediately by the policy-rate change.
- Treating a price response as proof of a complete causal chain.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Draw the policy-to-spending transmission sequence.
Identify possible delays at each link.
Separate pass-through arithmetic from causal evidence.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- rbi.org.in https://rbi.org.in/scripts/PublicationsView.aspx?Id=18086
For RBI preparation, check the current official notice before relying on changing dates, rules or examination requirements.
