Mr. Raghuram Rajan is the 2015 Governor of the Reserve Bank of India. Mr. Duvvuri Subba Rao was the previous Governor. The previous Governor was very particular about RBI's role in controlling inflation, and kept close to himself the task of the monetary policy. The previous Congress Government wanted RBI to cut the Repo Rates (Rates at which RBI lends to Banks), and thereby force Banks to reduce their rates of lending to industrialists and large businesses. But , with due credit to Mr. Subba Rao, we must concede that he resisted the pressures of the Congress Government to cut down lending rates.
After the annointment of Mr. Narendra Modi as Prime Minister, and Mr. Arun Jaitley as Finance Minister, the Governmental pressure on RBI , to cut down lending rates seems to have multiplied. The new RBI Governor apparently has held on his own for some time.
Seeing the fate of many State Governors, bureaucrats, DRDO Head, Censor Board Members, he seems to have mellowed down. The result seems to be: RBI has entered into a Monetary Policy Agreement with the Government of India.
RBI has already reduced the Repo rates twice; each time 0.25 percentage points. Now, it is time for arm-twisting the Banks to reduce their lending rates.
Of course, they will follow suit.
ybrao-a-donkey's humble views वैबीराव गधे के विनम्र राय వైబీరావు గాడిద వినయపూర్వక అభిప్రాయం
1. The percentage of interest cost, in the total cost of production of businesses, Govt., RBI, Banks do not seem to bother about. Corporates pay millions of bucks to cricketers, film stars to promote the sale of their goods. They spend huge amounts on T.V. advertising. The business lords fly on chartered or owned private aircraft. Corporates pay their club and entertainment bills. They maintain luxurious guest houses in Metros. BMW, Benj, Audi, etc. great cars costing millions. Their toilets may be covered with gold plates. Entire bodies of their wives (dharma patnis), and concubines (adharma patnis) may be covered with diamonds. Can't they bear 0.25 percentage points of interest?
2. What percentage of bank funds, the big business persons and industrialists, they use for real manufacture? What percentage they divert to speculative activities like IPL Cricket, real estate speculation, stock exchange speculation, commodity speculation. Banks do not have the required staff resources, skills, time, inclination, to check the end use of funds. If the business persons and industrialists stop their inter-corporate gambling and speculation, need for Bank funds will go down, and interest rates will not become a problem.
(To continue. सशेष. ఇంకా ఉంది.)