Rate cut call loud and clear - The Hindu

Rate cut call loud and clear - The Hindu

The present build-up on
demand for rate cut perhaps started with Finance Minister’s observation in his
Times of India interview during the last week of October this year. He 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.”

Connecting the above
observation and subsequent statements by FM favouring interest rates reduction and
need to take measures for achieving that, to Reserve Bank’s base rate were all
contributions from analysts and media.

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
should be seen as such and the call for measures from RBI to bring down fund
costs should be welcomed. Linking the cost of funds just to RBI’s policy rate, diverts
attention from the concern expressed by FM.

M G Warrier, Mumbai



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