A Cu­rate’s Egg

India Today - - MAIL - by Mo­han Rao

The credit pol­icy for the cur­rent fis­cal year an­nounced by the Re­serve Bank of In­dia on May 27 has turned out to be a cu­rate’s egg. The “good” part of it re­ceived in­stant no­tice, but soon al­most ev­ery­one was found hold­ing his nose. The hun­gri­est clam­our was for the so- called re­lax­ation of credit curbs. A per­sis­tent cam­paign had been mounted by the cham­bers of com­merce and even spokes­men of fi­nan­cial in­sti­tu­tions against what they called the ad­verse ef­fects of the credit freeze, im­posed by the erst­while gov­ern­ment, for curb­ing in­fla­tion­ary pres­sures. They were happy to note that the ceil­ing on the rate of in­ter­est on term loans has now been brought down to 12.50 per cent from 14.15 per cent. Even as in­dus­trial cir­cles took added com­fort from the fact that banks have been told, though not by spe­cific di­rec­tive, to pass on the ben­e­fit of in­ter­est sav­ing on de­posits to bor­row­ers par­tic­u­larly in the pri­or­ity sec­tors, sev­eral pop­u­lar coun­ters at the Bom­bay Stock Ex­change recorded size­able gains. Most of these shares have since main­tained their up­ward move­ment. But a feel­ing is grad­u­ally grow­ing that the stock mar­ket has per­haps over- re­acted. The new credit pol­icy has, af­ter all, tight­ened the screws on the avail­abil­ity of credit even while re­duc­ing its cost.

RE­SERVE BANK GOV­ER­NOR M. NARASIMHAM AN­NOUNC­ING THE CREDIT POL­ICY

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