Letters: Pragmatic view

With reference to the editorial, "A calculated gamble" (October 5), this time the market, by and large, had not factored in a rate cut. Continuing in the tradition of previous Reserve Bank of India (RBI) governor Raghuram Rajan of taking the market by surprise, his successor, Urjit Patel, has reduced the key policy repo rate by 25 basis points to a six-year low. This has brought cheer to the market.

Financial conditions have eased and with inflation set to settle within the manageable limit there was scope for a rate cut. Hence, the RBI thought it fit to do so, sooner than later. Growth will surely gain momentum.

The extent of transmission of rate cuts by banks to borrowers in recent times has been debatable. Much will depend on how banks pass the rate cuts on to borrowers. Banks have been facing a huge amount of stressed assets for quite some time now and the large volume of non-performing assets is worrisome.

It's good the RBI has decided to take a firm but pragmatic view of the developing situation by bringing about a change in the resolution under S4A following representation by banks. That would come as a breather for the banks. The sustainable part of restructured loans need not be considered as bad.

Srinivasan Umashankar, Nagpur

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