RBI stimulus package flawed, says Congress
The Congress yesterday slammed the Reserve Bank of India decision to increase liquidity into the banks, saying the money should have gone into people’s pocket and that the apex bank’s decision would not yield much.
A joint statement by Randeep Surjewala and Gaurav Ballabh said: “Instead of addressing demand, which typically involves putting money into the hands of the people, the RBI has decided to increase liquidity of the banks to lend more at a lower interest rate. Unfortunately, in a system that is grappling with fear, this type of prodding to lend will not yield much result.”
The RBI in its Covid-19 stimulus 2.0 has again missed the bus in the need to fuel demand, they said.
The pandemic has reached disturbing proportions and the consequent lockdown has completely rendered businesses to a standstill, said the statement.
The Congress said the RBI was focusing on increased bank liquidity, but they are not facing the problem of money, but risk appetite.
“What did not happen during the 2017-2019 period of economic slowdown is being attempted during the pandemic situation,” alleged Congress.
“When the demand for goods and services has crumbled and is likely to remain benign more on account of fear than on account of lack of opportunities, instead of focusing on how to fuel the economy with demand, the RBI is focusing on increasing liquidity and the cost of funds benefits,” the party said.
The RBI yesterday said to curb bad loans and maintain banks’ capital adequacy, banks will have to maintain a higher provision of 10% of all the accounts which have availed the moratorium on loan repayment till June 2020.
Meanwhile in Thiruvananthapuram, economist-turnedState Finance Minister Thomas Issac was least pleased after hearing the statement of the RBI governor Shaktikanta Das and said this was not going to be of any good to Kerala.
He demanded that either Das or Union Finance Minister Nirmala Sitharaman answer their concerns.
Issac told the media that in this new package that has come out, Kerala will only get “Rs 729cr additional when we draw under the Ways and Means segment which has been raised to 60%”.
“This once drawn will have to be repaid quickly also. What I want to ask, is there is no mention about waiving off agricultural loans and not even any mention of a moratorium. The present moratorium of three months means nothing, as the interest will return and it would be of no use.
Also, existing loans to all small traders and businessess should be restructured. I wish the central government takes up these issues, if not, it won’t help any one,” said Issac.
He said the need of the hour was that Kerala should be allowed to increase its borrowing from 3% to 5% and through this the state will get about Rs 18,000crores. “The decision to provide institutions like Nabard financial assistance would be really good,” said Issac.
Former State Planning Board member C P John described the RBI directives as a very bold one.
“The reduction of reverse repo rates is hugely welcome as it will bring more liquidity, but the announcement by the RBI governor’s statement that the GDP will reach 7% is a bit sketchy. In this aspect, this is like a politician’s statement,” said John, a leading opposition politician in Kerala.