The PM says Australia's major banks should pass on the latest reduction in the official cash rate in full.

After lashing the big four banks for “failing to explain” their decision to hold onto a collective $917 million they stand to reap from the lower cash rate, Prime Minister Malcolm Turnbull has moved to ward off political pressure for a royal commission into the sector by unveiling a new plan to keep the banks in line.

By forcing the banks to “front up” to a parliamentary committee every year, Mr Turnbull this afternoon promised to “create a regular and permanent method of accountability and transparency for the banks”.

The announcement comes as Australians vent their frustration at the banks on social media, after the Reserve Bank cut the cash rate by 25 basis points to 1.5 per cent and the big banks announced they would pass on only part of the reduction.

It follows Mr Turnbull’s strong criticism of the banks for failing to justify their position.

“They operate with a very substantial social licence and they owe it to the Australian people and their customers to explain fully and comprehensively why they have not passed on the full rate cut and they must do so,” Mr Turnbull said.

ANZ customers responded to the bank’s Facebook post announcing it had reduced its home loan rates to a “historic low”, criticising its decision to pass on only 13 basis points of the 25 point cut.

“You should be ashamed of yourselves,” Jason Mole wrote. “The RBA is trying to stimulate growth and you are effectively holding it back.”

“Two words: Royal Commission,” Westpac customer Tracy Vivienne wrote on the bank’s Facebook page.

Over at the Commonwealth Bank’s page, Rob Brooks wrote: “Pass on the full cut to borrowers. You’ll pass on any rise in full, if not more.”

NAB’s social media manager went into damage control as borrowers threatened to take their business elsewhere, posting a flurry of responses urging commenters to set up a meeting with their bank manager.

”We’d hate to see you leave after all this time — Can you please send through a private message and we’ll chat further," NAB wrote.

One customer replied: “I will talk to my broker thanks.”

‘MAKE A RATIONAL CHOICE’

Stephen Mickenbecker, Canstar’s group executive for ratings and financial services, said shopping around was a must for anyone who had not benefited from the rate cut.

“It’s never been easier to do that,” he said.

Another option for ANZ and NAB customers was to consider putting part or all of their loan on these banks’ new two- and three-year fixed interest deals, which had rates of 3.75 per cent.

“There are plenty of other lenders, we’ve got 95 providers listed on Canstar,” Mr Mickenbecker said.

“You can also say to your bank ‘look, I want to stay variable, but I’m thinking that I might move, and I can get a better deal elsewhere ... Very often, they’ll come to the party and reduce your rate.”

Ultimately, he said, “if you can’t get a good deal where you are and you’re paying half a per cent too much, you should be thinking about moving ... Make a rational choice.”

Many of the smaller lenders are yet to announce how much of the RBA cut they’ll be passing on, so it’s best to “wait a couple of weeks while the dust settles”.

WHAT ABOUT CREDIT CARDS?

While all eyes turn to the banks every time the RBA announces another incremental cut, nothing ever seems to change in the credit card market, where interest rates are as high as 20 per cent per annum.

The reason is simple, said banking sector analyst Martin North of advisory firm Digital Finance Analytic.

“Banks charge these rates on credit cards because they can; there’s not much competition,” Mr North said.

“Essentially, credit cards are regarded by the banks as a more profitable business that allows them to cross subsidise other parts of their operations.”

He acknowledged that banks suffered higher losses on these products, which are riskier than mortgages as they are not backed by the security of a property that the bank can sell to repay the debt if the customer defaults.

But, he said, “the rates that they make on credit cards are probably higher than they should be.”

Mr Mickenbecker said that anyone who had a credit card debt should look closely at their rate and shop around for a better deal.

While those who paid their balance in full each month could afford the high rate charged on reward cards, those struggling to pay off credit card debt should switch to a lower rate or consider a balance transfer.

But, he said, the latter option should be undertaken cautiously, as the rate would be hiked up once the balance transfer period expired — which could put debtors in an even worse position than they started in.

“Some people should cut up their credit cards,” he said.

DO WE NEED A ROYAL COMMISSION?

Labor’s proposed inquiry into the banking sector was one of the most heated issues of the Federal Election, and the Government’s one-seat parliamentary majority has put Mr Turnbull under intense pressure to hose down the push for a royal commission.

Today’s announcement is part of the Coalition’s strategy to keep a lid on a potentially damaging airing of the banks’ dirty laundry, which Mr Morrison has warned could put international confidence in Australia’s banking system at risk.

“This is a great opportunity for the banks because it’s an opportunity for them to explain how they deal with their customers, explain why they make their interest rate decisions and, in doing so, by being open and honest and accountable about it, what they will do is build confidence,” Mr Turnbull said of his toned-down approach, which will require the banks to appear before a House of Represtantatives standing committee on economics each year.

“It’s a great opportunity for them but it’s also an opportunity for parliamentarians and that committee and the Australian people who may respect to hold them to account.”

It means the banks will report in the same way as the Reserve Bank of Australia and APRA, which regularly appear before the committee.

“They’re going to have to front up to a House of Representatives committee and explain that and take questions about that and justify their actions in front of the elected representatives of the Australian people and that will — I tell you, that will drive some cultural change at the banks,” Mr Turnbull said.

Opposition Leader Bill Shorten dismissed Mr Turnbull’s approach as “empty rhetoric”.

“Mr Turnbull needs to be less talk and more action on bringing the banks to account for their arrogant conduct,” Mr Shorten said.

Australian Bankers’ Association chief executive Steven Munchenberg said a royal commission was unnecessary because the institutions were already dealing with the issues.

“It’s better for us to be fixing those problems now than waiting for some drawn out royal commission,” he told ABC radio.

— With AAP

dana.mccauley@news.com.au