RBI steps increase lending, but sector-specific package must: Bankers

RBI by reducing reverse repo rate by 25 basis points has sent clear signals to deploy that money - either by investing markets (bonds and short term paper) or by extending credit

While the Reserve Bank of India’s moves like providing more liquidity and easing asset quality norms would create favorable grounds for an increase in lending, a package from the government to kick-start the economy is a must for these measures to have a meaningful impact, bankers said.
 

Sunil Mehta, chief executive of the Indian Banks’ Association (IBA), said three enablers that would encourage banks to lend were cheaper funds, a regulatory leeway on asset quality norms, and guarantees for loans, especially on those given to the micro, small and medium enterprises (MSMEs). This will need to be complemented by sector-specific