Increasing credit can stimulate consumption | Photo credit: Andrii Yalanskyi
The US tariff clash. Uu. Along with other winds against geopolitics has become a serious obstacle to growth. Both the center and the RBI need to act on purpose. The RBI has been taking a series of measures in recent months to relieve liquuidity and reduce the cost of loans for consumers. The final guidelines on the liquuidity coverage ratio are another movement in this direction. These rules are quite indulgent compared to the draft of the proposal presented in July 2024, and it is expected that the system liquefability is expected in ₹ 2.7-3 Lakh million rupees.
The Basel III frame for liquuidity standards tries to ensure that banks have adequate high quality liquid assets to face a high -stress scenario that lasts 30 days. The framework establishes the runoff rate or the reduction rates of each category of responsibility. Although the draft of the circular issued in July 2024, prescribed an additional discount rate of 5 percent for deposits of individuals and small businesses acquired through digital channels, the new guidelines reduce the rate to 2.5 percent. In the same way, the revised guidelines have reduced the execution offer factor for wholesale deposits of trusts, associations, LLP. These CSF changes will improve a significant life in the system liquefishness once implemented next fiscal year. It can be remembered that liquidity had become very tight in the first part of this year due to seasonal factors and RBI Forex operations to support the rupee. The RBI had injected a lasting liquidity of around ₹ 7.9 Lakh million rupees through open market operations, longer VRR auctions and currency exchanges as extended this January to correct the situation. CSF relaxation will further improve lasting liquuidity.
The RBI has tasks of several measures to improve the flow of credit in the economy. Two consecutive 25 -dot cuts in the repo rate in February and April have led to a decrease in interest rates in the market, providing a breathing to the borrowers. The decrease in risk weights assigned to bank loans to NBFCS since April 2025 will ensure that NBFCs can access banking funds to allow the issue to lend small businesses and retail borrowers. Recently, the Central Bank expanded loan guidelines, allowing banks and NBFC to jointly lend to all borrowers. Loans were restricted to loans from the priority sector before. Similarly, putting project financing guidelines in Hold-A Step Whocked has locked funds for the provision of project financing-Provision, providing a short-term impetus to credit growth. The RBI is acting pragmaticly given the slowdown in credit growth, especially in the category of personal loans.
In a moment of world interruption, it is important to ensure that domestic consumption is robust. Together with income tax cuts announced in the budget, better credit availability can do what is necessary to contain consumption. The world’s global economic perspective indicates a fall of 50 basic points in global growth in 2025 to 2.8 percent on its January projections. The writing is on the wall: opens the spikes.
Posted on April 25, 2025