Today it is going to be a crucial day for Indian economy as the Union Finance Secretary Mr Ajit Kumar is slated to meet the big guns of the Indian Financial Institutions and some of the leading Indian banks besides the head of the Indian Banks Association Mr S S Kohli who also is the head of the Punjab National Bank.

The primary aim of the get together is to discuss the continuing slowdown of the Indian economy and the slow credit offtake and discuss ways and means to arrest the same and of course also the unwillingness of the Indian Financial Institution’s and banks to bring down their lending rates.

The Financial Institutions and Banks are firm in their views to not cut down their lending rates, as they find no takers from the corporate sector for their funds, which are piling up day and day, thereby creating problems of liquidity for them. They also are unwilling to take any more responsibility for the continuing slowdown of the Indian economy. as in their opinion it is now the sole responsibility of the Central Government to do something in this regard. They argue that mere slashing of interest rates will not work any more magic since the culprit of the problem lies in the speedy implementation of economic measures like gearing up infrastructure projects, which remains the vital cog in perking up the sluggish Indian economy and moreover the rates at their lowest value. Once the projects take off in a speedier and smooth manner, then the other factors such as banks lending interest rates can be worked out. A bank chairman said the only solution lies in the above-mentioned factor, which can recreate back the process of economic growth, and also clarified that banks are finding no takers for their funds even at sub-prime rates. He also pointed out that the corporates unwillingness to lift their funds has led to putting their funds in government securities and the overnight call money market.

A classic example which justifies the action of the financial institutions and the banks comes in the form of the two leading Indian banks State Bank of India and the Bank of Baroda who have pegged down their short-term prime rates at 10.5%, a rate which is applicable to assets such as letters of credit and discounting of bills and these assets are normally safe and self-liquidating in nature. And hear this piece of news – even with this no bills have come up for discounting and the reason attributed to this is that trading activities are passing through a dull phase. The banks are parking funds at 6.5 per cent per repo window of the Reserve Bank, which has led to average cost of the funds well over 7 per cent leading to heavy losses.

The only way the problem of the economic slowdown can be arrested is that the Central Government must wake up and act fast in taking up crucial decisions such speedy approval of infrastructure projects and their implementation on a war footing, it has gotta do this as a lot of water has already flowed under the bridge and sitting on crucial decisions will only lead to creation of further bottlenecks eventually creating the monster of economic recession. The buck lies in the Government’s court and it has to work out proper measures and remove the cobwebs, which come in the way of their fast implementation.