Credit growth: Barking up the wrong tree?

It is unfair to expect risk capital from banks to prop up the economy. They deal with public money

India’s banking regulator is upset with the extreme risk aversion of commercial banks, which are holding back the flow of credit to the productive sectors of Asia’s third-largest economy. This undermines the role of banks as the principal financial intermediary in the economy, the Reserve Bank of India (RBI) says.

However, the bankers have a different story to tell. They are not risk averse; they are just being prudent.

Who’s right? Probably, both. Bankers are not giving credit to those who are perceived to be capable of playing a role in pushing the economic growth and creating employment as they