Credit Culture Gets A Leg-up

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: The Reserve Bank of India (RBI) has tried to strike a fine balance between the competing needs of funds by various segments of the real sector. It has promised to support the growth momentum through appropriate liquidity management in the interest of macroeconomic stability. Though there has been a widespread anticipation that interest rates in India have bottomed out given the recent trends in international interest rates, RBI has left unchanged the interest rates policy.

On the contrary, it has clearly said that any increase in interest rates at this juncture may have an adverse impact on investment demand, which has shown signs of pick-up after prolonged sluggishness. This is consistent with the central bank’s accommodative monetary stance supportive of growth.

RBI has tried to remove the inconsistency in NPA classification procedure of long and short duration crops by decreeing that a loan granted for long duration crops will be treated as an NPA if the installment of the principal or interest thereon remains unpaid for one crop season beyond the due date.

RBI is sensitive to the potential of SMEs to the economy. The move to create an appropriate database on SMEs through CIBIL is aimed at ensuring proper credit pricing for this sector.

It aims at helping the segment by initiating a CDR mechanism on the lines of existing ones for the corporates. Rural sector has received due attention of the RBI. Bringing construction projects relating to agro-processing, storage of agro-products, among others are part of this initiative.

Freedom to banks to raise long-term bonds, with a minimum maturity of five years to the extent of their exposure of residual maturity of more than five years to the infrastructure sector, is aimed at promoting infrastructure lending.

Consistency in money market reforms has been ensured through the gradual move towards a pure inter-bank money market.

Withdrawal of limits on unsecured exposures, modification in prudential credit exposure limits, withdrawal of preferential treatment to PFIs for capital adequacy purposes are some of the steps meant to remove inconsistencies/ exemptions in guidelines and facilitate business processes.