Stable inflation, low PLR to help reduce interest rates: Jalan

MUMBAI, APRIL 19. The Reserve Bank of India Governor, Dr. Bimal Jalan, today said a stable inflation scenario and freedom for banks to lend at below prime lending rate (PLR) will help reduce the interest rates as well as revive credit offtake. ``With the inflation scenario remaining as it is, making available credit at below PLR and decline in short-term rates by 180 basis points, interest rates will soften further", Dr. Jalan told newspersons after announcing the Monetary and Credit Policy for 2001-02 here.

Asked about the timeframe for reduction in interest rate, he said, ``There is no such fixed time period but if you take timeframe as one year, certainly". ``It is a positive step for liquidity in the current situation", he added. The RBI had initiated steps to make banks to follow prudential norms such as provisioning, cash reserve ratio and statutory liquidity ratio to provide comfort to depositors of co-operative banks, Dr. Jalan said.

Elaborating on package for export credit, he said reduction in interest rates by 1-1.5 per cent would help exporters gain competitive advantage. The prime focus of the credit policy was structural reforms and introduction of `long term steps for deeper, broader and free financial market which is less dependent on RBI' he said. ``While performing their role, they have to manage the working in such a manner as to gain depositors' confidence", he added.

Referring to the failed merger proposal of UTI Bank and Global Trust Bank, the governor said, ``The RBI does not sponsor mergers". Due process had to be carried out, despite some people wishing it to be completed before March 31, 2001, to ensure that merger was through in that fiscal, he added.

On capital market exposure of the private sector bank, he said, ``if somebody violates prudential norms... Calls stocks as commodities and calls firms to which he has lent as corporations,... What will you do"? accepting the need for sound, safe and strong banks, he said, ``you will not be able to prevent frauds, losses and failures because someone has been imprudent".

The economy was expected to grow at a rate between 6 and 6.5 per cent in 2001-02, Dr. Jalan said. Referring to recovery of non- performing assets under one time settlement scheme, the deputy governor, Mr. S. P. Talwar, said public sector banks had recovered Rs. 1,665 crores as on March 31.

- PTI

Send this article to Friends by E-Mail

Section  : Business
Previous : Bullion rates
Next     : UCBs advised not to lend against shares