'Provisioning for credit control a better option'

RUN-UP TO THE MONETARY POLICY

It is a more focused approach compared with raising interest rates.

Bhaskar Ghose's (managing director, IndusInd Bank) take on the RBI's Monetary Policy Review to be announced on April 24

Interest rates
We have not seen the last of interest rate hikes as there is a lot of pressure for bringing down inflation, especially in the run-up to state and national elections.

Credit growth
Bank credit has been growing at 30 per cent year-on-year. This has not come down substantially. The high level of credit expansion is one of the matters the Reserve Bank of India (RBI) is concerned about and rightfully so. I expect some measures to be announced in the monetary policy.

Inflation is the priority
The RBI's intention is not to choke bank credit across the board. Though the RBI has said economic growth is secondary to managing inflation, it would not want to slow down growth in general.

The way out
By increasing provisioning norms, disbursals to specific sectors can be slowed down. Therefore, raising provisioning requirements is the best way. It is a more focused and surgical way compared with raising interest rates across the board.

Raising interest rates can result in slowing growth in sectors where the RBI does not want a slowdown such as new capital expansion and infrastructure lending.