This may happen sooner rather than later. Government is likely to cut interest rates on small saving and on PPF. Most of these products offer high rates of interest which are not exactly market driven. This distorts the yield curve since these small savings products also offer tax breaks. For example, PPF offers 8.5% interest, the interest is tax-free, there is Section 80C exemption on investment and redemption is also tax free. As a result, banks end up at a disadvantage. Hence they are not able to cut rates on deposits and also they are unable to pass on rate cuts to borrowers. This impacts transmission.