The Reserve Bank of India (RBI) is taking anti-inflation steps to curb inflation. Recently in credit policy RBI has hiked the benchmark short-term rate by 50 basis points and also hiked the cash reserve ratio (CRR) for banks by 25 bps. Following this the finance ministry might advice public sector banks to moderate credit disbursal for personal loans so that productive sectors can get more money supply.
The ministry wants that banks should be more careful when distributing loans although country’s growth do not get affected directly.
It seems a message to this effect will be conveyed personally by finance minister P. Chidambaram to bankers when he will meet bankers for the review of credit policy.
Finance ministry on Tuesday issued a statement indicating towards the things to come. It said banks should take “prudent” decisions while distributing credit so that credit is made available to the productive sectors.
Expressing his views on the statement issued by the finance ministry a banker said, “This means that we would have to put a check on personal and retail loans”.
Commenting on the anti-inflation steps taken by RBI in credit policy the finance ministry said that theses steps will help in bringing inflation to a reasonable level which is now on the edge of 12%.
Further the finance ministry stated, “Government expects that the measures taken by RBI, in continuation with measures already taken over the last two months, will help in moderating and containing inflation”.
Currently inflation is ruling at 11.89%, which is much above the RBI’s comfort level of 5%. RBI is expecting that the monetary measures taken in the credit policy will bring inflation down to 7% by March next year.
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