Opinion
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Letters to the Editor
Bank interest rate
Sir, — Of late, the Reserve Bank is over-using the option of cutting the interest rate and reducing the reserve ratio as a tool of fiscal policy regulation in anticipation of a higher growth rate of industrial output through cheaper money for investment. The objective is good but has its own limitation and, at a point of time, the effect is negative.
One should not lose sight of the fact that higher rates of interest do generate a higher activity of circulation and purchasing capacity in the money market through private individuals, scheduled and non-schedule finance institutions and that again go to investment and disbursements, thus contributing to the national economical growth.
The present RBI policy has crossed the optimum line and become a contributor to recession. It might have helped certain business houses for their specific viability, but certainly not to the overall interest of the economy. The existing exercise has lowered domestic consumption, eroded rupee value and diminished the purchasing power. The idle reserve with the financial institutions has touched an all-time high, contrary to the hope that money supply will increase the industrial investment.
Ramanuj Prasad,
Ooty, T.N.
Chennai
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