In the recent quarterly review of the monetary policy, the reasons cited by the RBI for the one per cent reduction in the SLR are not convincing. So far, nothing has been done by the policy-makers to tackle the widening supply-demand balance. In fact, most of the banks are comfortable as far as liquidity is concerned. The reasons for decrease in credit growth vis-a-vis investment growth are entirely different. It is not true that banks are holding back on credit expansion; rather, prospective borrowers are not interested in availing of credit at the present high interest rates. Though the interest rates on deposits are high now, it is felt that investment in gold and real estate is far more profitable than depositing in banks. One is unable to understand why the Government is playing a subdued role in containing inflation by not releasing the supply-side bottlenecks.
- T .S. N. Rao (HBL)
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