In its latest latest policy review, the RBI has kept all key rates unchanged except for SLR, which has been brought down to 23 per cent from 24 per cent, infusing additional liquidity of about Rs 62,000 crore. This is expected to help banks channel credit to productive sectors. With global demand receding and capacity utilisation being low, one has to be on guard on the effects of such a measure.
With gloom all around, both at the global and local levels, and poor monsoon adding to the woes, there is a lack of direction from all concerned to bring the economy back on the rails. The new Finance Minister should take some bold steps to ensure forex inflows into a sagging economy.
This refers to the editorial “A textbook response” (Business Line, August 1). The RBI has once again done a balancing act by reducing the SLR. This move is bound to increase the flow of liquidity, which will lead to a substantial leap in growth. By not touching policy rates and the cash reserve ratio, the central bank had done well, in view of the existing economic situation.
It is now for the Finance Ministry, under a new incumbent, to take steps to control the fiscal deficit (according to the warnings given by the RBI during its previous reviews), expedite reforms and woo prospective investors to revive the economy. Inflation needs to be reined in to mitigate the sufferings of the aam aadmi. The RBI’s directive to relax the norms in forex earnings will help exporters.
The poor, especially the senior citizens, will feel encouraged to keep their hard-earned money in banks as the interest rates have been left unchanged.