Question

In recent times, there has been a difference of opinion between the RBI Governor and the Finance Minister. What is the basic point of difference?

Answer 1

• The RBI Governor has been facing pressure to lower the bank rate (including the repo and reverse repo rates) and the SLR, with the aim of reducing the lending rates of commercial banks. This reduction is intended to encourage investment and boost the economic growth rate.
• However, the RBI Governor has been resisting this pressure, arguing that controlling inflation should be the first priority. This is important to ensure that the real interest rate does not fall and the interests of depositors are protected.
• The Governor also emphasizes that commercial banks should first reduce their lending rates and pass on the benefits of the already lowered repo rate to borrowers.