Bikky Khosla | 11 Jun, 2019
week saw some important developments which augur well for the economy. First,
the government formed two new cabinet committees to check the declining trend
in growth, generate employment, spur demand and push consumption. These are the
major macroeconomic challenges facing the economy currently and the urgency the
new government has shown to address them deserves praise.
the Commerce Minister held a meeting on issues related to export credit with
representatives of export organisations. The minister admitted that in the last
few years the share of export credit has come down. More importantly, the
minister revealed that he had asked the RBI to look into the possibility of
providing $25 billion line of credit from its foreign currency reserves for
swap to well performing banks, and to also look into priority sector lending
norms for export credit.
the RBI last week lowered the repo rate for commercial banks by 25 basis points
to 5.75 percent, the lowest in the past nine years. This is the third reduction
in repo rate this year. Besides, the apex bank changed the monetary policy
stance from neutral to accommodative. This is a welcome step in the background
of falling economic growth. Additionally, the RBI Governor assured that the
central bank would make sure that transmission of reduced repo rate would be
faster and higher.
the apex bank also issued a new prudential framework for resolution of stressed
assets, replacing its controversial 12 February 2018 circular. There are three
major changes: it is now made voluntary for lenders to take defaulters to the
bankruptcy court; the framework now applies to more categories of lenders
including small banks and NBFCS; and penal provisions have been introduced for
lenders. This new framework is, no doubt, a better one.