RBI January rate cut still in question

By Accommodation Times News Service

A rate cut which was about to happen in January has now been called into question with the Reserve Bank of India saying that it is worried that one kind economic saver like real estate are shifting to non-financial assets because of the very low returns on financial assets.

The central bank has concerns that the rising defaults among the companies and bank given the rise in bad loans it should look at increasing provisions for non-performing assets. RBI has said that the flow of credit to productive sectors of he economy like real estate industry, infrastructure, gold needs to be increased and reductions in statutory reserve ratios have augmented resources for lending. The Reserve Bank of India has been addressing fund requirement by cutting the cash reserve ratio, it has held back from signaling lower interest rates by reducing the repo rate- the rate at which it lends overnight funds to banks.

It seems that sixth issue of the Financial Stability Report, RBI said that the economic growth was held back because of fall in domestic savings, high inflation etc.  RBI said, extant regulations do not permit banks to become insurance brokers. Banks assuming the role of insurance brokers may also lead to conflict of interest where the bank is also the promoter of an insurance company.





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