New Delhi: Government is looking at ways to ensure transmission of monetary action on the ground as there is no silver bullet that can deal with the rate cut issue, Minister of State for Finance Jayant Sinha today said.
"When I say transmission, I don't just mean it in terms of ambit of marginal cost of funds-based lending rate (MCLR) or what we have done with banks, I also mean in terms of execution on the ground," Sinha said at an event organised by industry body CII.
"... Rather than thinking that there is some silver bullet that we can fire through rate cuts that will immediately boost the economy, we are looking at where the real bottlenecks in monetary transmission, execution on the ground and change in dealing with some of crony capitalism, black money type issues. So, we are working on those fronts."
The minister was responding to RBI's policy announcement. The Reserve Bank in its first bi-monthly monetary policy review of 2016-17 today lowered interest rate by 0.25 percent and introduced a host of measures to smoothen liquidity supply so that banks can lend to productive sectors and indicated an accommodative stance, going ahead.
RBI Governor Raghuram Rajan, while unveiling the policy, said banks have already reduced interest rates by 0.25-0.50 percent on account of shift to the MCLR model and expressed hope the they will effect more cuts following the policy announcement.
Credit growth across the system (public and private sector banks) is running at the level of 12 percent, which is "very healthy growth rate".
The minister, however, added that deposit growth has been a little slower than the past, but there is plenty of deposit in the system to finance projects.
He claimed that the Modi-led NDA government is both pro-poor and pro-business.
Noting that India has very successful private banks, the minister said, "He would expect that private sector banks should be able to provide finance."