Government to "walk alone" to support growth: Chidambaram
30 Oct 2012
Dissapointed by the Reserve Bank's cautious stance, Finance minister P Chidambaram said economic growth was as much a challenge as containing inflation and that the government would "walk alone" to face the challenge.
"Growth is as much a challenge as inflation. If government has to walk alone to face the challenge of growth, then we will walk alone," he said reacting to RBI's second quarter policy review.
RBI, while announcing its quarterly monetary policy today (See: RBI cuts CRR by 0.25%; other rates unchanged), reduced the cash reserve ratio for banks by a quarter percentage to 4.25 per cent. The central bank, however, increased the provisioning requirement for banks to cover loan losses.
RBI today raised banks' provisioning for restructured assets to 2.75 per cent from 2 per cent earlier as requests for loan recasts hit an all-time high. It is expected to top Rs3,25,000 crore this fiscal.
The move that could more than offset the Rs17,500 additional liquidity that the 25 bps reduction in CRR would create, will hit the bottomline of banks by around 4 per cent.
"Government is doing its best to send the clear message that we are on the path of fiscal consolidation. It is my hope that everyone will read and understand the government commitment to path of fiscal consolidation," Chidambaram said.
