A Catch-22 situation

This refers to “RBI snips rate, growth forecast” (May 23). Mindless rate cut by the Reserve Bank of India (RBI), which the banks or the businesses never asked for, is a step in the wrong direction. Besides not benefiting anyone, it may tremendously hit senior citizens who continue to grapple with sinking interest rates. In the absence of any old age pension and securities, steep drop in interest rates is forcing them either to dive deep into the stock markets or beg from their children to survive.

Banks may not like to give loans to financially unstable companies. A major reason is dwindling and fastdiminishing demand. The government which has unleashed a ~20 -trillion package has failed Dalal Street expectations mainly because it carries no weight in terms of generating demand. What good is a loan if productions lines are choked because there is no demand and/or there are no workers? It’s a Catch-22 situation. The RBI can help businesses with bonds rather than forcing banks to tender unsecured loans. The micro, small and medium enterprises need hand holding not hand wringing.

It should also stop pretending that with EMI moratorium for another three months, the EMI holders will be benefited. Interest accrued is going to be added to their overall outstanding and by the end of the term, they may have to pay seven to eight extra EMIS. If the RBI really wants to help, it should waive off interest for EMI holders and not defer it.