The credit policy announced by the Reserve Bank on Wednesday raised hopes of cheaper home loans and personal loans soon, but the banks have to do a quick reassessment of their books in order to pass on benefits of the RBI’s status quo policy to their customers. It is hoped the banks take quick decisions, though some of them feel home loan rates are already low and there’s no need for further reductions. There’s the sticky problem of banks being saddled with non-performing assets. The RBI knows this, and it is heartening that governor Urjit Patel, in his policy announcement, said the central bank was working with the government on this stressed assets problem so that funds could start flowing to productive sectors of the economy.
The RBI is also trying to bring small savings rates closer to savings deposit rates to make banks more competitive in attracting savings. What’s intriguing is while banks have a surplus after the November demonetisation, they are still not lending as they should.
It was hoped the RBI would cut rates to give a fillip to growth. But to be fair, the central bank shouldn’t have to bear this responsibility. The government must get its act together and find ways to get the economy on the growth path. Finance minister Arun Jaitley was recently quoted as saying the government was examining why private investment was still not happening, and he implied it might start in the near future as companies unwound their excess capacity built during the economy’s boom period.
