Goldman Sachs has released a latest report on the state of the Indian commercial market. Let's take a look.
There are two contrasting developments taking place in the Indian markets. One the standard says the money available RBA is continuously growing from seven lakh crores of money deposited by banks commercial banks in RBA for interest rate of 3.75.
The kitty has fallen to eight lakh 42,000 crows in spite of RBA cutting the reverse deposits, that is the rate at which banks can deposit money with RBA deposits keeps rolling.
Now, there are 8.5 8.42 lakh crores. This means that banks are not willing to lend anecdotal evidence from all over in Tamilnadu tell me that banks are not willing to lend have cut cc limits are trying to console try to train to recover money as they assess the impact of the pandemic.
No more but msmes are strapped for cash and are begging for credit in spite of government announcing a relaxation of 35% in the sec limit, most unit msme unit holders that good track record and bank say are saying at best banks are willing to give 10% with collateral.
There is clearly a divergence between what necessity,Rahman is saying and what is actually happening on the ground.Recently a newspaper reporter your Goldman Sachs two Pork, it says in the Source Forge net of equal create some commercial credit shank pay 30,000 CROs on April 24 in the next 15 days, banks reported that they have further credit has done to the commercial sector for 69,000 crows that means, in 30 days or in the first 25 days of April, the total amount of commercial credit exposure given by the banking sector has shrunk by one lakh crores even before the pandemic impact, credit to commercial sector was dropping.
This means that business activity has come to a standstill. And in spite of best efforts, banks are not willing to when banks are not willing to lend because they are not willing to take the risk. They want to pass on the risk to somebody else.
What Goldman Sachs says is that further rate cuts are on the web on the anvil and more rate cuts will happen.
But in spite of Robbie harvests happening regularly and being completed, we still seem to have a big problem with rising food prices because of supply chain shocks.
So easy credit may mean that the money will go into the hands of the rich and who do not know credit who don't need credit. This will fuel inflation. And if inflation goes out of control, RBA in about 15 months time will have to raise rates.
However, in the short term as Goldman Sachs's RBA may be desperate and cut rates for them, but in my opinion, cutting rates is not going to help. You have to force the banks to lend. The only way you can force the banks to lend is take the risk off the table.
And one the sovereign Kenna one need a sovereign government can assume the risk. These are momentous times times which we have never seen. In 100 years, it's better that the government takes taxes on its book. Rather than trying to pump it up to the banks on this, this happens, commercial credit will not grow, and the economy will not recover. Thank you .
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