Letters to the editor

By: | Published: August 4, 2015 12:19 AM

RBI must cut rates

RBI must cut rates
This refers to the editorial “Time for another rate-cut” (August 3). I fully agree with the view that “if rate cuts are not going to spur demand, they cannot add to inflationary pressure either”. However, owing to the current slump in the demand and offering virtually no incentive to invest, the manufacturing sector has taken a real beating. In all fairness, there seems to be a justified case, even on the most conservative note, for a rate cut of 0.25% by the central bank. But, as the editorial also observes, even if the RBI opts for a rate cut in the wake of persistent demand from all the corners, its ultimate ‘success’ will depend on the ability of the government to ‘convince’ the PSBs to pass on its consequential ‘benefits’ to the borrowers of all categories who will be relieved of some of their interest burden. But sadly, the track record of these PSBs has been far from satisfactory as many of them are yet to transmit RBI’s previous cuts through their rates. While some experts are apprehensive that RBI could maintain a status quo, a Moody’s is ‘reasonably’ expecting a rate cut of 0.25% in repo rate. I am also strongly of the view that RBI governor Raghuram Rajan wouldn’t disappoint the corporates and the financial markets this time. Mind you, the finance ministry is also very keen to obtain the RBI Governor’s nod for a rate cut in repo rate in the wake of the emergence of several supporting factors.
SK Gupta, Delhi

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