Bikky Khosla | 27 Jul, 2020
is expected to go for another dose of repo rate cut in its MPC meet during
August 4 to 6, according to a latest survey conducted among a group of
economists and industry experts. At a time when India’s growth story has taken
a hit due to the COVID-19 crisis, such a move would be welcome. Recent retail
inflation data shows an uptick, but still it is widely expected that a
calculative accommodative move will be taken by the central bank in August
risk aversion by commercial banks is clearly evident in latest credit data.
According to the RBI Financial Stability Report, heightened risk aversion
pulled the overall credit growth rate of scheduled commercial banks to 5.9
percent on a year-on-year in March 2020, from 13.2 percent in March 2019. The
report adds that among the PSBs, there was a sharp credit contraction across
all rating categories except and above as also among non-PSU obligors. This is
a concern, no doubt.
recently, the central bank Governor pointed out that such extreme risk aversion
by financial institutions will have adverse outcomes for all as the Indian
economy is reeling under the COVID-19 pandemic and post-lockdown woes. The
economy now needs a strong capital push and in this regard our financial
intermediaries must play a proactive role. It is also notable that, these days,
banks are largely shying away from lending, particularly to the MSME sector,
and this trend must end if
growth is to revive.
the government has revealed that it will soon set up a single window system for
clearances and approvals of industry. It is a welcome move. Also, work is
already going on for setting up a land bank, for which six states have already
given their consent. Last week, a top official also informed that the Centre
will soon come out with new stimulus packages to boost manufacturing. These
decisions are welcome, but at the same time, credit flow must be given a strong
boost if we want to pave way to sustained economic growth.