Cheaper Loans, Here’s Why
Apropos ‘But Do These Numbers Add Up’ (Feb 6), Mythili Bhusnurmath doubts the veracity of the GDP projection and the projected fiscal deficit. But for a decision to be taken by the MPC of the RBI, these may not be all that relevant as their decision may be based on the current liquidity position. Deposit figures of commercial banks were .₹ 1,07,837 billion on January 20, 2017, and there is an addition of .₹ 13,196 billion in a year. And bank credit during the period has increased by just .₹ 3,891 billion to .₹ 74,352 billion. Borrowing by banks from RBI was .₹ 159 billion as January 20, 2017, and this was .₹ 1,620 billion a year ago. So, banks are flush with funds and they are not dependent on borrowings from RBI. RBI’s policy rates are applicable only for borrowings from RBI to banks. So, in a comfortable position, banks will reduce their lending rates.