07/08/2016 8:24 AM AEST | Updated 07/08/2016 10:10 AM AEST

Labor Ramps Up Pressure For Royal Commission Into Aussie Banks

The ALP says it's time to pull the trigger on an inquiry into the sector.

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Labor is maintaining its call for a Royal Commission into the nation's banks.

Labor has doubled down on its call for a Royal Commission into the nation's banks after the sector failed to pass on this week's historic official cash rate cut.

The call comes after the Reserve Bank on Tuesday trimmed the official interest rate to a fresh low of just 1.5 per cent, with the major banks passing on only a proportion of the cut to customers.

That decision has sparked renewed calls for an investigation into the sector, especially in the wake of new research showing Australia's banks are the most profitable in the world.

Labor Senator Katy Gallagher on Sunday reiterated the ALP's call for a Royal Commission into banking.

"We all agree we need a strong and competitive banking and financial services system but also need one that is responsive, accountable and transparent to its customers," the Shadow Minister for Small Business and Financial Services told the ABC.

"We would argue that there is enough evidence there that would warrant a very close examination of the issues facing Australia's financial services system and that a royal commission is the best way to do that."

Gallagher said the banks needed "to be accountable and transparent" for their decision not to pass on the full cash rate reduction to customers.

Labor has said previously that its Royal Commission would probe why banks don't pass on RBA interest rate cuts in full.

Prime Minister Turnbull this week urged the big banks pass on the full rate cut, or risk facing mounting calls for a Royal Commission.

Turnbull is not a fan of an inquiry into the sector and has said the banks need to keep in mind that they operate with a social licence from the community.