“No sector specific sops are needed, we all are big boys,” Lodha said. “What can be done is that we need to put money in the hands of the consumer. Problem is not just RBI
lending rates but the delta with lending rates. It is not good to have a policy rate that is so remote from actual lending rates.”
The lending spread has reached levels seen only during crises, Mishra wrote, and suggested that policy makers boost money supply by buying government bonds “in sizable quantities.”
A decision to announce a fresh stimulus could be a tough one for Prime Minister Narendra Modi’s government, after its budget deficit topped 90% of its full-year goal only halfway through the fiscal year. Meanwhile, authorities are injecting fresh capital into state-run banks
and urging them to issue new credit.
While the RBI’s repo rate was cut by 110 basis points between February to August, the weighted average lending rate on fresh rupee loans fell by only 29 basis points and that on outstanding loans increased by 7 basis points.
Loan-growth slumped to 8.8% in October, the lowest level in two years, RBI
data show. Bank credit to private, non-financial companies accounts for more than half of India’s gross domestic product, according to data from the Bank for International Settlements.
“Monetary transmission has remained staggered and incomplete,” the RBI
said in its latest policy review.