Credit flow from banks improved: Ahluwalia

The availability of bank credit in the country has improved following the various measures taken by the government and the Reserve Bank of India (RBI), planning commission deputy chairman Montek Singh Ahluwalia said.

With industrial production in the country showing a continuous decline over the past few months, bank credit has become a key area of concern for the government, he said.
 
In fact, Ahluwalia said, commercial banks have started providing more credit in the last few weeks.

"In the last few weeks or so, there has been a change and the availability of credit from banks has improved," Planning Commission Deputy Chairman Montek Singh Ahluwalia said at a function in New Delhi on Friday.

He said the government and the RBI had held several meetings with the banks in order to find ways of improving the flow of credit to the productive sectors of the economy.

The Reserve Bank of India has cut its key short-term lending rate by 350 basis points since mid-October, and the five-year swap rate has fallen more than 200 basis points since then, he pointed out.

The RBI has infused over Rs400,000 crore to overcome liquidity shortage Since mid-September, but there were complaints that banks are not lending due to risk aversion.

The Reserve Bank recently directed banks to restructure loans to small and medium industries and infrastructure to stimulate the economy.

The government has also taken a slew of measures, including reduction in excise duty and a hike in public expenditure, as part of two stimulus package, he pointed out.

Industrial production in the country showed a two per cent fall in December 2008 against an annual growth rate of around 9.0 per cent over the past few years.