The Hindu Business Line : Monetary and Credit Policy

The Monetary and Credit policy has become a bi-annual ritual sans any sanctity. Bankers are taking the right clues from the Policy as far as the deposit rates are concerned but do not show the same enthusiasm with the lending rates. The small and medium borrowers and entrepreneurs still continue to pay high interest rates what with banks charging anywhere between 14-16 per cent when the average PLR stands at 11 per cent.

The idea mooted in the last policy that Banks must have transparent PLRs vis-à-vis their spreads has really not found any acceptance with the banks. The RBI should enforce the same strictly so that small enterprises can really scout around the market and realign their loan portfolios.

The RBI should have declared a moratorium on Banks now investing in Government securities in excess of statutory requirements and instead monitor the credit disbursal mechanism of banks on a more periodical basis. This would make banks necessarily go through the advances route rather than fund the fiscal profligacy of the government.

These issues will have to be immediately addressed if the projected growth rates are to be achieved.

Anand Ram Seshu

Hyderabad

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