ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Is the Growth in Bank Credit a Serious Concern?

Despite the series of policy rate hikes and the corresponding hike in lending rates, the demand for bank credit seems to be robust. The banking system should be allowed to meet this demand in a non-disruptive way without fuelling inflationary pressures. Higher interest rates do not seem to be a deterrent to credit growth since the demand for credit is fuelled by economic activity and banks find their own way of handling additional risks. It would therefore be prudent for the Reserve Bank of India to continue with its anti-inflationary stance and the tightening of monetary policy. However, the pattern of credit growth suggests the need for redistribution in favour of agriculture and exports.

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