Limiting credit availability should not hit growth: Jaitley
Two days before a crucial meeting of the Reserve Bank of India’s (RBI’s) central board, Finance Minister Arun Jaitley said on Saturday that growth must not be throttled by limiting credit availability and liquidity.
It is necessary that the growth process does not suffer because of the cleaning up of the banking system from the “collectively committed sins” during 2008-14 when the regulatory mechanisms also overlooked high debt accumulation, he said.
“This will have to be done in a manner in which you restore the health of the banks, you restore the discipline as far as the banking system is concerned and at the same time, we don't end up throttling growth by throttling credit and liquidity in the market. That is a key issue,” Jaitley said, speaking at the annual Economic Times awards here.
He added, “We will be looking for the wrong solutions to a problem where easier solutions are available.”
The remarks come ahead of the RBI meet on Monday, where the government, through its nominees, is likely to press for growth- supporting measures, including the creation of a special liquidity window for the troubled non-bank lending sector, liberalising of the prompt corrective action that restricts normal lending, and easier credit supply for small businesses.
The RBI has made clear its reluctance to yield to these demands. The government has also initiated consultations under the never-used Section 7 of the RBI Act through which it can direct policy moves to be undertaken by the RBI in public interest.
Aid infrastructure creation for growth: Gadkari to RBI Union minister Nitin Gadkari on Saturday blamed the RBI circulars for “complicating” project finance, and asked the central bank to aid infrastructure creation in the country and push up the growth rate.
The road transport minister said over 150 projects involving investments of over ~2 trillion are currently struggling to get financial closure.
“Unfortunately, many times ...circular issued by the RBI (is) creating more complications and this is one of the reasons why I am facing problems as far as financial closure is concerned,” Gadkari said, speaking at the annual ET awards here this evening.
“I feel that it is appropriate time for the RBI to support infrastructure in the country as far as our growth rate is concerned,” he added.
Asked if he has interacted with the RBI on this, he first said it is not his job and launched what can be perceived to be an attack on the RBI brass, which, media reports say, has peeved lenders because of its refusal to meet them. “It is not my job, I don't want to meet him. My experience is not good... I have said my point in minimal words. You meet only those from whom you can get some benefit, why should you meet people for nothing?” Gadkari said.