Surprise element

Apropos the editorial, “Cautious stance” (April 7), in what can be termed the most intelligent policy review in recent times, the Reserve Bank of India (RBI) while not tinkering with the key policy repo rate and maintaining a neutral stance, injected an element of surprise by raising the reverse repo rate by 25 basis points (bps).

This move narrowed the policy rate corridor from 50 bps to 25 bps indicating that the focus now is on taking out excess liquidity from the system and working towards achieving the medium-term target for consumer price index inflation of four per cent.

Following demonetisation last November, banks are still sitting pretty on huge float funds that need to be channelled for productive use. There is still room for them to go for a rate cut as greater transmission of previous rate cuts by the RBI is yet to take place along expected lines. 

Stressed loan assets resolution is also engaging the RBI’s attention. 

This is welcome as banks have a huge pile-up of non-performing assets. Consequently, the most important thing that has to take place quickly is the business of lending in a usual manner. The onus is on the banks to act fast and spur growth.

Srinivasan Umashankar   Nagpur

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