Growth in non-food credit has been slow despite the pick up in the growth of the manufacturing sector this year.
At the same time, commercial bank investments in government securities are higher than reserve requirements. Does this indicate that there is no demand for bank credit at current interest rates, or does it suggest that banks prefer to invest in government bonds than to lend to industry?
Maybe, a little bit of both. This could partly be due to corporates borrowing abroad cheaply, however this is not a complete explanation.
All borrowers are not able to borrow in international markets. So what explains the lack of bank credit growth at a time when industry appears to be on a path to revival?
Given the large fiscal deficit and the huge appetite of the government to borrow, it seems that banks are taking the easy way out.
Some months ago, Deputy Governor of the Reserve Bank of India (RBI), Rakesh Mohan, criticised banks in India for being
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
