The RBI’s inflation obsession | Business Line

The RBI’s inflation obsession | Business Line

Online comments posted on October 26, 2013:

The author has captured the deficiencies in RBI’s monetary policy stance which has been obsessed with a lingering worry about taming inflation. When RBI’s rates annnouncements or guidance on the direction of interest rates do not influence prices or deposit rates which are the major concerns of common man, why not RBI listen more carefully what the political bosses and industrial houses say and act accordingly?
The new Governor Dr Raghuram Rajan is infusing fresh thought into Monetary Policy. Let us hope,  his announcement on October 29 will factor in  the concerns expressed here and
among others, the following:
i)                    To the FM’s embarassment, last week’s review revealed that one-third of all NPAs of PSBs were contributed by top 30 NPA accounts in each bank.
ii)                   While much ado is there about base rates, deregulation of savings bank interest rates did not add to the interest income of real SB account holders.
iii)                 The Net Interest Margins enjoyed by banks in India are among the highest in the world.
iv)                 The theory that ‘interest cost is not the major ingredient in project cost’ is interpreted to mean that small borrowers can afford to pay higher rates of interest.
v)                  Big depositors get preferential rates of interest and big borrowers get attractive terms for borrowing including special attention when their loans become NPAs.
vi)                 The impact of changes in base rates on interest rates(both deposit and credit) administered by banks during the last 3 years.
vii)               The finance ministry’s linking of interest rates on festival season consumption loans to release of additional share capital to PSBs.
M G Warrier, Mumbai


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