The Reserve Bank has rejected claims by the big four banks that their decision to withhold half the 25-basis-point cash rate cut from borrowers was offset by lifting the rates being paid to ­depositors, according to The Australian economics editor David Uren.


The major banks heavily promoted the fact that they were lifting rates for term deposits to about 3%, but the RBA said these deposits accounted for less than 2% of their total funding.


The RBA’s quarterly economic review said that although there had been some increase in bank funding costs this year, it fell far short of the 10-15 basis points the banks have retained from this week’s rate cut.


Market economists expect the Reserve will be forced to cut its benchmark cash rate further, possibly as low as 1%, to ensure the benefit gets through to borrowers.


Although the RBA has cut its cash rate by 50 basis points since the middle of last year, rate increases by the commercial banks last year and the holding back of half this week’s rate cut means the standard variable rate for an owner-occupier is only about 20 basis points lower.


Prime Minister Malcolm Turnbull has criticised the banks, demanding they explain their decision not to pass on last week’s reduction in the official interest rate in full.