Common Sense says and demands that Common Man has a right to have a peaceful, safe and comfortable life which the Govrnment is expected to provide. Common Sense also says that there should be equality of opportuninies for every one to survive with the aid of Public Sector Undertakings' efficient and unbiased approach to provide the service at a reasonable cost. Public sector banks have miserably failed to provide an efficient and excellent service is a well acknowledged fact and they have frittered away the savings mobilised from the masses on the corporate borrowers who have taken an easy route through banks to loot the public. The public have common sense to understand the atrocities committed by PSBs and the Government in exploiting the hapless depositors and tax payers to cover up the NPAs accummulated in banks. The deposits' rates are coming down whereas the banks Net interest Margin are remaining high and the advances rates seldom get adjusted to the policy rates announced by the RBI .Retail Inflation has come down in terms of index but the actual prices paid by the retailers have no relationship with the index is the ground reality. Ask a common man as to how much he pays for his dal, rice, onion, fruits, oil, and other food items apart from other maintenace expenses on a day to day basis. He is finding it extremely difficult to make both ends meet is the reality and to understand this, no common sense is required at all. Dr Rajan knows better the sufferings of common masses as the inflation supposed to have touched below 4% is not sustainable and he has abundant common sense to understand the market demands and other extraneous pressures to bring down the policy rates. More than anyone, Dr Rajan takes care of the interests of the economy is a fact and given the freedom he will ensure that the economy moves forward with an excellent trajectory of growth and keeping down the inflation. If the inflation is down the cost of funds in the economy which include the interest rate component also will drastically come down. The real strength of the economy is to keep down the costs and make all essential commodities and services affordable to the vast majority of the people.
Dr T V Gopalakrishnan
3 comments:
Very true. But there is a powerful lobby which sends out messages day-in and day-out to the effect that 'rate cut' by RBI is the solution for all problems faced by the country. Dr Rajan is the first Governor who is trying to make economists, politicians and policy makers understand that in India the central bank's role is much beyond the one as 'Rate-cutter' and that RBI needs the policy support from GOI and willingness on the part of banks and India Inc to cooperate by putting their houses in order.
The Government itself has not understood the role of RBI in the economy is what one can infer from these sorts of pressures and direct and indirect messages. Political agenda of the Government is understandable and appreciable but the Central Bank can have only an economic agenda which needs to be pursued with professionalism and mastery over the subject Money, Finance, Inflation, international economic relations factoring into the dynamic and fast changing economic scenario and geo political changes. The job of a Central Bank Governor is perhaps the toughest if one were to be true to the job particularly in an economy where politics play a key role and socio economic development is dependent upon the financial system than anything else.
Well said Mr. TVG & Mr. Warrier. It was reported that most of the NPAs in the PSBs are the loans granted on the recommendations of the people who matters in the authority. If interest rate is reduced continuously on deposits to reduce interest rate on advances, the fate of senior citizens depending on their meagre interest income on the deposits made by them from their retirement benefits will very badly suffer for their survival. Further, without such reduction of interest on deposits, banks cannot reduce interest on advances. If interest on advances is reduced, the benefits of Corporates are very high and their profits go up. Imagine the amount of advances from banks by Ambanis, Adanis, Birlas, Mallyas, Godrejs, Tatas & others are running into thousands of crores of Rupees. 1% reduction on advances will benefit the Corporates with 10s of crores in their profit. Only if Corporates increase their profits, Political parties & politicians can get donations for them to make money, more money & much more money. One would have noticed that of late Corporate honchos are purchasing houses for them to stay at a cost of Rs.450, Rs.750 crores. Govt. wants to help them and not the poor.
Even the 0.75% interest rate reduced by RBI during this year is not acted upon by many of the banks. Better the Government instruct their banks to act as per RBIs reduction. RBI is now making it easy for Corporates to borrow long-term funds by expanding the list of recognised lenders..like Real Estate Trusts, ECBs, overseas regulated financial entities, etc. In view of the external debt to GDP is going up around 24% as of March 2015, if Corporates borrow extensively from abroad, our external debt will soon cross $500 billion very soon. Whether such move to ease borrowing from abroad is good for the country.
Though Mr. Raguraman Rajan, RBI Governor has been recognised by economic world as the best Central Bank Governor in the world,it was reported that our Govt. was planning to remove him and bringing in pressure from several quarters to reduce interest rate for benefiting Corporates. We will wait and watch.
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