The Indian banks have inflated risk aversion after the global meltdown despite being well-capitalised, which in turn has affected the growth of big as well as small industries, according to Suresh D Tendulkar, chairman of the Economic Advisory Council to the Prime Minister.
He said the Indian banks? limited exposure to the global financial system had been a boon in disguise.
?Indian banks are well capitalised and don?t have high non-performing assets. So credit availability should not have been a problem as it is now. But the banks have inflated risk aversion,? Tendulkar said.
The government has been monitoring that the Reserve Bank of India (RBI) makes all the necessary arrangements to reduce lending rates. ?Now that the lending rates are down, credit flow will start. How the banks are going are implement them is not what the government can see,? Tendulkar said. He was present at an interactive session organised by the Merchants? Chamber of Commerce here on Thursday.
According to Tendulkar, there were certain favourable factors that would take India out of the meltdown. All earlier economic crisises in India coincided with the crisis in agriculture, but this time the trigger was the US financial system to which the Indian banks had very little exposure. The agricultural GDP grew at 4.5 % in 2008-09 though there has been a dip in the same during the third quarter of the fiscal. The Q3 agricultural GDP was based on advanced estimates of agricultural production, but there was an overall agricultural growth. ?This has not actually affected the rural purchasing power,? Tendulkar said.
He expects the process of economic revival in India to start within the next 3-6 months with the international economy trying to get out of the crisis as soon as possible and the possibility of international cooperation getting higher.