Cheaper Loans, Here’s Why

The Economic Times - - The Edit Page -

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.

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