A Curate’s Egg
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.