Finance Minister Arun Jaitley favours interest rate cut | Business Standard News

Finance Minister Arun Jaitley favours interest rate cut | Business Standard News

Online comments posted on October 26, 2014:
True, in the interview
given to Times of India Finance Minister did say that “…but other expansion in
real estate will take place significantly only if the interest rates come down
a little. Currently interest rates are a disincentive. Now that inflation seems
to be stabilising somewhat, the time seems to have come to moderate the
interest rates."

But connecting the above
observation to Reserve Bank’s base rate was the reporters’(TOI) contribution
who added, “the Reserve bank which has kept rates unchanged, has maintained
that despite recent moderation, inflation remains a challenge.”
Across sectors, lending
rates are high in India. One is tempted to add, compared to lending rates,
deposit rates are relatively low, as margins are high( may be, higher than the
deposit rates in some countries). Let us remember interest rates remain
deregulated in India for a long time now. FM’s reference to high lending rates
in a particular sector(real estate) should be seen as such and linking it to RBI’s
policy rate, just diverts attention from the concern expressed by him.
Let us hope, the proposed
meeting of PM with Bank Chiefs mentioned in the interview by Arun Jaitley will
bring clarity on how banks should be allowed to function without incurring
losses and meet national priorities. Especially for Public Sector Banks, the
support promised by FM is crucial. A proactive policy support will help banks
to bring down NPAs, helping them to do their business on lesser margins and
bringing down lending rates.

M G Warrier, Mumbai


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