Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty, in an interview with Rutam Vora, says banks should not complain about the stiff priority-sector targets. Edited excerpts:
Some banks have said meeting the new priority sector target would be difficult and have sought more time. Will RBI consider it?
Our target is not to help banks achieve their targets. Our job is to look at the lower category borrowers, who find it difficult to get credit. Banks will be forced to pass on the pressure to their local officials to achieve these targets. And the branch manager will then provide loans to those lower-category borrowers.
We don’t consider loans to large corporates under priority sector and have made necessary changes. Now, if they (the banks) want more time it is a different issue and we will examine it. They do not understand why we have given those targets. It is because the work is difficult to achieve. For this, they should not be complaining. At present, we are not doing anything on allowing extensions. If I consider it, I will announce at a proper time or it may come in our policy.
Do you see any impact of the weak monsoon on growth?
Generally, if the monsoon is not good, the agricultural growth comes down, and if it comes down, the production disparity affects the industry and manufacturing sector. In any case, the contribution of agriculture to overall growth has come down drastically in our country. But we have also become more resilient to drought. So, that way the impact is lower (on growth). If monsoon is affected, sowing will drop and this will pull credit growth further down. But I believe in the rabi season, it will get compensated.
Is RBI taking any action on foreign banks mired in controversies abroad?
Do you think that the better-than-expected GDP figures would encourage RBI to extend its ‘pause’ stance?
We don’t speculate or give forward-looking guidance on this. As and when, inflation comes down, so will interest rates.
What steps should be taken to correct the deposit-credit growth gap?
The industry should work harder irrespective of the prevailing crisis. While our priority is that small and medium companies must get credit, smaller borrowers must get loans and distribution of credit must go more for productive purposes. This is what is required in the current condition.