Liquidity is comfortable at the moment: Chakrabarty
The Reserve Bank on Wednesday said there is enough liquidity to take care of the lending activities of the banking system.
"I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored," Reserve Bank of India Deputy Governor K C Chakrabarty said on the sidelines of an event organised by Assocham in New Delhi .In order to ease liquidity situation, the Reserve Bank last month announced infusion of Rs 17,500 crore (Rs 175 billion) by reducing Cash Reserve Ratio (CRR) by 0.25 per cent.
Accordingly, the CRR, or the portion of deposits banks have to park with the RBI, now stands at 4.25 per cent, while the repo rate, at which RBI lends to the system, has been retained at 8 per cent.
The reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, remains at 7 per cent.
Reiterating that high interest rate was not solely responsible for slowdown in economic growth, Chakrabarty, however, said, high inflation has resulted in moderation in growth.
"...what we are trying to say (is) that interest rate is not the only reason for the slowdown in growth. But inflation is definitely a reason for slowing down the growth," he said.
"Slowdown in the growth is for a variety of reasons. Yes, to that extent monetary policy is not able to control the inflation and not effective, it is responsible. We cannot say something wrong happening in the economy, we are not responsible. Collectively, we are all responsible," he said.Asking banks not to shy away from giving loans to productive sectors, Chakrabarty said, "When NPAs are high your risk management system has to be improved, your credit appraisal system has to be improved."
"Because of NPA fear, banks need not stop lending but banks must improve their credit management capability for which there is enough scope, he said, adding, banks need to pay more attention to the credit needs of agriculture, SME and retail.
Asked if 7 per cent inflation has become new normal, the Deputy Governor said "...if our economy is getting integrated with the global economy, what is the global average inflation, our inflation cannot be much different from that.""Markets are getting integrated, economies are getting integrated so you have to look for what is the average global inflation," he said.
"If the average global inflation becomes 7 per cent, then it has to be 7 per cent inflation for us," he added.
"I think liquidity is okay...whatever is the liquidity, that is adequate and comfortable. This is always monitored," Reserve Bank of India Deputy Governor K C Chakrabarty said on the sidelines of an event organised by Assocham in New Delhi .In order to ease liquidity situation, the Reserve Bank last month announced infusion of Rs 17,500 crore (Rs 175 billion) by reducing Cash Reserve Ratio (CRR) by 0.25 per cent.Accordingly, the CRR, or the portion of deposits banks have to park with the RBI, now stands at 4.25 per cent, while the repo rate, at which RBI lends to the system, has been retained at 8 per cent.
The reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, remains at 7 per cent.
Reiterating that high interest rate was not solely responsible for slowdown in economic growth, Chakrabarty, however, said, high inflation has resulted in moderation in growth.
"...what we are trying to say (is) that interest rate is not the only reason for the slowdown in growth. But inflation is definitely a reason for slowing down the growth," he said.
"Slowdown in the growth is for a variety of reasons. Yes, to that extent monetary policy is not able to control the inflation and not effective, it is responsible. We cannot say something wrong happening in the economy, we are not responsible. Collectively, we are all responsible," he said.Asking banks not to shy away from giving loans to productive sectors, Chakrabarty said, "When NPAs are high your risk management system has to be improved, your credit appraisal system has to be improved."
"Because of NPA fear, banks need not stop lending but banks must improve their credit management capability for which there is enough scope, he said, adding, banks need to pay more attention to the credit needs of agriculture, SME and retail.
Asked if 7 per cent inflation has become new normal, the Deputy Governor said "...if our economy is getting integrated with the global economy, what is the global average inflation, our inflation cannot be much different from that.""Markets are getting integrated, economies are getting integrated so you have to look for what is the average global inflation," he said.
"If the average global inflation becomes 7 per cent, then it has to be 7 per cent inflation for us," he added.
http://www.rediff.com/business/report/liquidity-is-comfortable-at-the-moment-chakrabarty/20121121.htm
Banks can cut rates in current policy framework: RBI
Banks penalizing good borrowers because of rising bad debts, says K.C. Chakrabarty
New Delhi: Banks can further reduce interest rates within the current monetary policy framework, but are penalizing good borrowers because of rising bad debts, said K.C. Chakrabarty, deputy governor at Reserve Bank of India (RBI).
“If 5% NPA (non-performing assets) becomes 1% NPA, banks will be able to reduce rates. A well, timely paying borrower is compensating for the borrower who has defaulted,” he said, addressing a seminar organized by the Associated Chambers of Commerce and Industry of India.
More bank debts are turning sour mainly as industrial borrowers struggle with the slowing economic growth, which eased to a nine-year low of 5.3% in the quarter ended March before picking up slightly to 5.5% in the three months ended June. High interest rates have also contributed to loan defaults.
Chakrabarty urged Indian companies to seek lower interest rates from banks than approach the central bank for further easing of the monetary policy.
“If policy rates are brought down, it doesn’t necessarily mean that the corporate sector will get cheaper credit. Banks should improve their efficiency, which will bring down costs and enable banks to lower rates,” he said. “With the same level of inflation, banks can reduce interest rates if they bring down overhead costs. Banks have made a lot of investment in technology, but transaction costs have not come down.”
On inflation, the deputy governor made a case for bringing down core manufacturing inflation, as agricultural prices are unlikely to ease. “Core inflation has to come down to 1% from around 5% now for any visible impact on inflation,” he said.
Chakrabarty disagreed with the argument that higher interest rates are the main reason for the slowdown in the economy, but accepted that “to the extent monetary policy is not able to control inflation, yes it’s RBI’s responsibility”.
http://www.livemint.com/Industry/vCCw87ietXAXtYGfUPFjAJ/Banks-can-cut-rates-within-monetary-framework-Chakrabarty.html
| Corporates responsible for rising NPAs, says RBI Dy Governor |
| Holding corporates responsible for a major part of the rising bad loans, RBI Deputy Governor K C Chakrabarty today said honest borrowers are paying for the sins of "inefficient". "Again NPA is creation of the corporate sector, a major part of the NPA. You borrow from banks, you don't pay them in time. They becomes NPA in the books of the banks. I pitty on bankers," he said at an event organised by Assocham here. "So why you are not able to pay back because your cost is more, income is less. You don't pay back the money. This can be possible only with the improvement in the productivity and efficiency," he said. In a worsening trend of companies failing to meet their financial obligations, banks have seen a rise of up to 85 per cent in bad loans since the beginning of the current fiscal. In the first two quarters of 2012-13, banks referred a record number of 74 CDR cases, involving a total debt amount of Rs 40,000 crore for restructuring. Chakrabarty further said if corporates are able to bring down the risk perception of banks, interest rate could be reduced in their benefit. "If you (corporates) can bring down risk in the economy, if the bank perceive that there is no risk, your interest will become 9-10 per cent," he said, adding that if 5 per cent NPA becomes 1 per cent then this can be done". "Today what is happening is a person who is sincere, who is honest, he is paying money and the fellow who is inefficient, who is not able to do the business, is not paying the money. It becomes NPA. Its cost goes to the fellow who is paying the money," he said. "The bank would charge another 2 per cent from the fellow who is paying. We must look at this aspect little bit more dispassionately," he added http://www.business-standard.com/generalnews/news/corporates-responsible-for-rising-npas-says-rbi-dy-governor/81831/ |
No comments:
Post a Comment