Banks should lend more to commercial institutions’
The Hindu Business Line, April 16, 2009, Page 6
Our Bureau, Hyderabad
Banks should lend aggressively to commercial enterprises to generate higher economic activity to lessen the impact of global recession on India, according to Dr C. Rangarajan, Member of Parliament.
Responding to questions after his lecture at a national symposium on ‘Global financial crisis: Impact on Indian economy’ at the University of Hyderabad here on Wednesday, Dr Rangarajan said as the liquidity is not an issue now, “banks should take a broader view to lend more to commercial institutions”.
Banks appear to be ‘averse’ to active lending mainly due to fears of adverse impact on recession, Dr Rangarajan, former Governor of RBI, observed.
“The availability of credit for Indian exporters abroad has dipped due to slowdown. So, there is a greater need for banks to provide this domestically,” he said.
INTEREST RATES
While observing that a further cut in interest rates on lending might improve aggregate demand in the economy, the former Chief Economic Advisor to Prime Minister said the capacity of banks to bring down interest rates is ‘limited’.
“Due to higher rates being paid on some deposits mobilised previously, banks may have to keep lending rates at a level,” he pointed out.
Earlier, he said the continuing Government expenditure would shield the economy from recession/depression.
PUBLIC SPENDING
“The public spending on infrastructure should remain at a high level in a situation like the present one is not a matter of dispute. The revised estimates of total expenditure for 2008-09 are 20 per cent higher than the budget estimations,” he said.
Precaution, however, should be taken to hold fiscal deficit from phenomenally increasing, he added.
The economy would witness signs of recovery in the second half of 2009 as there has not been any decline in the production, he predicted.
Dr Y.V. Reddy, former Governor of RBI and Emeritus Professor in the Department of Economics, University of Hyderabad, outlined various theories explaining the causes of the sub-prime crisis in the US and global recession.
The Hindu Business Line, April 16, 2009, Page 6
Our Bureau, Hyderabad
Banks should lend aggressively to commercial enterprises to generate higher economic activity to lessen the impact of global recession on India, according to Dr C. Rangarajan, Member of Parliament.
Responding to questions after his lecture at a national symposium on ‘Global financial crisis: Impact on Indian economy’ at the University of Hyderabad here on Wednesday, Dr Rangarajan said as the liquidity is not an issue now, “banks should take a broader view to lend more to commercial institutions”.
Banks appear to be ‘averse’ to active lending mainly due to fears of adverse impact on recession, Dr Rangarajan, former Governor of RBI, observed.
“The availability of credit for Indian exporters abroad has dipped due to slowdown. So, there is a greater need for banks to provide this domestically,” he said.
INTEREST RATES
While observing that a further cut in interest rates on lending might improve aggregate demand in the economy, the former Chief Economic Advisor to Prime Minister said the capacity of banks to bring down interest rates is ‘limited’.
“Due to higher rates being paid on some deposits mobilised previously, banks may have to keep lending rates at a level,” he pointed out.
Earlier, he said the continuing Government expenditure would shield the economy from recession/depression.
PUBLIC SPENDING
“The public spending on infrastructure should remain at a high level in a situation like the present one is not a matter of dispute. The revised estimates of total expenditure for 2008-09 are 20 per cent higher than the budget estimations,” he said.
Precaution, however, should be taken to hold fiscal deficit from phenomenally increasing, he added.
The economy would witness signs of recovery in the second half of 2009 as there has not been any decline in the production, he predicted.
Dr Y.V. Reddy, former Governor of RBI and Emeritus Professor in the Department of Economics, University of Hyderabad, outlined various theories explaining the causes of the sub-prime crisis in the US and global recession.
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