Farmer loan waivers undermine honest credit culture: Urjit Patel after RBI leaves repo rate unchanged

The central bank left the repo rate unchanged at 6.25 per cent as was expected.

- The Reserve Bank of India's six-member Monetary Policy Committee (MPC) voted unanimously to leave the repo rate at 6.25 per cent while hiking the reverse repo rate by 25 basis point to 5.75 per cent.
Explaining the rationale behind the decision, Governor Urjit Patel said that demonetisation had resulted in massive inflow of cash into the system. The increase in the reverse repo rate will drain out the surplus money and bring about a balance to the balance system.
Today's policy meeting was the third such consecutive meet where the central bank maintained status quo on the policy rate as the Urjit Patel-led RBI guards against any possible uptick in inflation.
Projecting inflation for the first half of 2017-18 at 4.5 per cent and at 5 per cent for the second half, the bank expressed confidence that the economy will recover this fiscal.
RBI also indicated that the pace of remonetisation will stimulate consumer spending, which has been down ever since the ban on the old Rs 500 and Rs 1,000 notes was announced.
The central bank also projected India's GDP growth at 7.4 per cent for the current fiscal, up from the 6.7 projection for 2016-17.
Interestingly, Governor Patel came against farmer loan waiver, a topic that has grabbed national attention. Saying that waiving off farmers' loans undermines an honest credit culture, Patel said that such waivers do not bode well for credit discipline and could also impact future borrowers.<

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