Cut in Lending Rates, A Respite in Election Time

At last, there is a good news amid violence-marred elections. RBI has eased short term lending and borrowing rates by 25 basis points and asked banks to slash interest rates. However, it’s the timing of the initiative – taken with concerns over the slowing economy – which leaves us baffled.

 Noticeably, RBI’s announcement comes just on the day Naween Chawla takes over as CEC, and a day before as many as 141 constituencies spread across 13 states go to poll in second phase. Needless to mention, it is the largest phase of the five phased election process and, most probably, will have the greatest say in new Lok Shaba’s interior design.

 Further more, assembly elections for 140 segments of Andhra Pradesh and 70 of Orissa are due to be held along with this phase.

 Is Chawla’s taking over as CEC indicative of giving India political – or maybe economical – stability after the elections? Is it possible if cut in interest rates might have a bearing on voting pattern in remaining phases of elections, especially the second, which is incidentally the largest one?

 Anyway, people can at least benefit from low lending rates when govt is constantly under criticism for high inflation, and when Election Code of Conduct is in force to put a tab on any developmental work.

 But there arises a question: why RBI refused liberalization of foreign banks on the ground of economic meltdown if lending rates can be slashed?

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