The Reserve Bank of Australia acknowledged the light touch of its own monetary policy machinery in its quarterly Statement on Monetary Policy."Around half" of the August 2016 RBA cash rate reduction has made it through to advertised housing lending rates while it's the same outcome for business lending rates, the RBA observed in its quarterly Statement on Monetary Policy on Friday.The average outstanding housing interest rate has fallen by around 35 basis points this year, the RBA said, and speculated this was "likely to decline a little further as maturing loans are replaced with loans on lower interest rates."Borrowers taking the "lowest available variable interest rates" access credit at "more than 50 basis points below the average outstanding interest rate," the RBA noted.Major banks "passed through little over half of the August cash rate reduction to their business lending rates" but there is more to the story on the cost of business credit."Banks have tightened underwriting standards and increased their marginson some lending to large businesses over the past year," the RBA said.There is muted support in the RBA commentary for the banking sector's defence of the restrained cuts to home loan interest rate cuts applied following the 25 basis points cut in the official cash rate to 1.5 per cent three months ago."The composition of banks' funding has remained fairly steady," the RBA said, with "recent growth in liabilities been driven by term deposits and long-term wholesale debt" alongside demands on banks to prepare for the introduction of the Net Stable Funding Ratio, a reform with an effective date still more than a year away."Following the May and August cash rate reductions, estimates of the major banks' debt funding costs have come down," the RBA pointed out."Since the beginning of the year, these costs have declined by a little less than the cash rate, mainly reflecting less than complete pass-through of the cash rate reductions to term deposit rates."It said "estimated funding costs are expected to fall further as the cost of new wholesale debt remains below the cost of outstanding debt."On the other hand "competition for retail deposits, particularly termdeposits, has increased over 2016 and banks expect this to continue over the next year, ahead of the introduction of the NSFR."The RBA said "the recent widening in the spread between term deposit rates and the cash rate follows a period of several years when term deposit rates were relatively low compared to interest rates on other funding sources, such as short-term wholesale funding and bonus saver accounts. "Consistent with interest rates on term deposits becoming more attractive than other deposit types, stronger growth in term deposits has been observed more recently."