The Economic Times reported on 4th October that a decision has been taken to advise state-run banks to provide cheaper loans to fund purchases of autos and durables. The decision was taken at a meeting between Finance Minister, Chidambaram and RBI Governor, Raghuram Rajan.
The Hindu reports on 6th October that Deputy Governor of RBI, K.C.Chakrabarty has observed that "no one can force" lenders to selectively cut rates. He added, "It is not a prudent measure to increase consumption by lowering interest rates. Cheap loan plan can impact asset quality of banks".
What is really happening? Prima facie, it appears that Rajan and Chakrabarty have contradictory views on the proposed measure. If so, Chakrabarty need not have embarrassed the Governor by voicing his differing opinion publicly a la Rahul Gandhi. Chakrabarty is a mature person and therefore this interpretation is wrong.
What is more likely is that Rajan has been bamboozled by the minister into agreeing to his view. Despite his learning, Rajan is still a babe in the political woods and he is not yet Y.V.Reddy who could stand his ground whatever be the pressure on him. Has Rajan sought a favourable 'dissent' from Chakrabarty so that Rajan can stave off ministerial coercion?
The Hindu reports on 6th October that Deputy Governor of RBI, K.C.Chakrabarty has observed that "no one can force" lenders to selectively cut rates. He added, "It is not a prudent measure to increase consumption by lowering interest rates. Cheap loan plan can impact asset quality of banks".
What is really happening? Prima facie, it appears that Rajan and Chakrabarty have contradictory views on the proposed measure. If so, Chakrabarty need not have embarrassed the Governor by voicing his differing opinion publicly a la Rahul Gandhi. Chakrabarty is a mature person and therefore this interpretation is wrong.
What is more likely is that Rajan has been bamboozled by the minister into agreeing to his view. Despite his learning, Rajan is still a babe in the political woods and he is not yet Y.V.Reddy who could stand his ground whatever be the pressure on him. Has Rajan sought a favourable 'dissent' from Chakrabarty so that Rajan can stave off ministerial coercion?
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