The Reserve Bank of India has not come upto the expectations and requirements of the business and industry in the reduction of banks lending rates upto the 50 basic points. After a gap of nine months of lowered the reporter by 25 basic points only to reduce it from 8 to 7.75 per cent. As usual it also lowered the CRR (Cash Reserve Ratio) also 25 basic point to bring it down to 4 per cent.
So far through the CRR the RBI has infused money liquidating in the banking system by 40,000 crores of rupees and this current addition will increase it by another 18,000 crores of rupee to make it 58,000 crores of rupees of course there is tight money position and additional infusion will ease the situation to some extend. The entire exercise of the RBI can be termed as ‘some thing’ but not upto the point of satisfaction. The 7.75 per cent bank lending rates are still high for industrial sector to who lift to big amount. At present the Bank will be able to give short term and small loans for housing and auto purchases.
A major set back that banks are facing that the fixed deposit are coming down. It shows that under the overall economic stress the individuals are not able to save enough to lock it in fix deposits. The FD and assured with time limit money that banks can float in loans for easy earnings. Inflation is one of the reasons for slow growth in term deposits. The growth rate of the country has been lowered from 5.8 to 5. per cent.
The fiscal deficit is hovering around 6 per cent away from the target to bring it down to 5 per cent. The RBI hopes the inflation will come down in the coming financial year of 2013-14 upto 7.5 per cent. But the food inflation is worry causing worry being still at the 2 digit level. The RBI is also apprehensive that current severe winter must have put on adverse affects on the crops. It may lead to lower production and higher prices in the coming days. The RBI admitted the sluggish trends still visible in the industrial sector are there sharp reduction in export orders.
It is dwindling our foreign exchange reserves and shortage of foreign currencies for imports. The industry is also facing the shortage of power to maintain its production level. Due to shortage of coal the power houses are not working to full capacity of power generation. In such a fight position the industry is on dire need for capital at cheap rates to keep the work on and compete in global market. But investments are not forthcoming and even foreign investment are not steady. The withdrawal by foreign investors is much more and that is making situation unstable. Investment and further cuts in bank lending rates are the prime need of the hour for industrial revival.
Founder : Late Shri Ramgopal Maheshwari