RBI rate cut not likely to boost corporate lending, private sector's capex

Historically, there has been no correlation between growth in bank credit to industry and lower benchmark interest rate

The recent cut in benchmark interest rate by the Reserve Bank India (RBI) is not likely to boost corporate lending and private sector’s capital expenditure (capex), going by past trends. 

Historically, there is no correlation between growth in bank credit to industry and lower benchmark interest rates. On the contrary, data suggests an inverse relationship, wherein faster growth in corporate lending had occurred during periods of rising interest rate and vice versa.

For example, the benchmark interest rate rose steadily from 4.75 per cent in February 2010 to a high of 8.5 per cent by March 2012, but the period saw a