In a strong rebuttal to rate cut demands from “heavy-indebted industrialists”, RBI governor Raghuram Rajan on Monday said that banks charge them high rates because of the ‘risk’ they may not repay and
In a strong rebuttal to rate cut demands from “heavy-indebted industrialists”, RBI governor Raghuram Rajan on Monday said that banks charge them high rates because of the ‘risk’ they may not repay and they must support efforts to improve loan recovery for lower rates.
He said that RBI has been “wise to disregard advice in the past to cut more deeply”, while observing that high inflation has burdened middle-class savers and poor with “hidden inflation tax” for decades when industrialists and governments were paying “negative real interest rates”.
Stating that he gets “a lot of heart-rending letters from pensioners complaining about the cut in deposit rates”, Dr Rajan said he can understand why the pensioners are upset when they see their interest inco-me diminishing.
Giving a lecture here at Tata Institute of Fundamental Research, he further said inflation is now contained fairly close to the upper bound of RBI’s target zone, which suggests “we have not been overly hawkish, and were wise to disregard advice in the past to cut more deeply”.
