Let Bond Come to the Res­cue

The Economic Times - - The Edit Page -

Apro­pos ‘Tilt­ing at the Wind­mills’ by Mythili Bhus­nur­math (Aug 7), RBI’s rate cut may not give a big push to fresh bank lend­ing and growth. Bankers are wary of lend­ing af­ter the CBI ar­rested the former chair­man of IDBI Bank for its loan to King­fisher Air­lines. The fall in in­come from fixed de­posits will push de­pos­i­tors to in­vest in other in­stru­ments that yield su­pe­rior re­turns. This, in turn, will hurt banks that lend to in­fras­truc­ture projects. A more vi­able op­tion would be to cre­ate a vi­brant debt mar­ket. The gov­ern­ment should re­move reg­u­la­tory hur­dles in cre­at­ing fully liq­uid deep bond mar­kets.

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