…but cash-flush banks offer some hope | business | Hindustan Times
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…but cash-flush banks offer some hope

business Updated: Jan 04, 2009 20:44 IST
Mahua Venkatesh

Economists say monetary measures, rather than a fiscal kickstart, seem to be on sounder ground as the nation looks to revive economic growth – though the price of loans is a matter of lingering concern.

With the RBI reducing the repo or the short term lending rate by 100 basis points to 5.5. per cent and cash reserve ratio – the share of deposits that banks must park with the central bank -- to 5 per cent there will be surplus liquidity in the system while bringing down the cost of credit.

Mahesh Purohit, director, Foundation for Public Economics and Policy Research told Hindustan Times that the administrative procedures needed for a fiscal push had been completely ignored but RBI’s steps were on track.

"The central bank’s measures will have a direct bearing on the economy with bank lending becoming easier and cheaper giving a boost to various sectors,” he said.

Anil Bharadwaj, Secretary General, Federation of Indian Micro & Small & Medium Enterprises (FISME), said the government’s package hadlittle to offer to the small and medium enterprises, but the central bank’s move will facilitate easier credit flow towards the sector.