ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Need for Calibrated Policy in Interest Rates and Credit

The indirect measures taken by the central bank to control inflation have led to a situation where banks are pushing up rates on both deposits and loans, more on the latter than on the former, ending in a widening of the spread. This is of a piece with banks' recent behaviour in ignoring the credit requirements of a number of productive sectors. What is called for is a calibrated intervention by the monetary authority with a combination of regulations and measures of moral suasion on both the cost of credit as well as its distribution in favour of the productive sectors.

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