Coronavirus has hit economies of around 97 countries of the world including India. While the Indian government has successfully put the COVID-19 infection under its control, more efforts are required to curtail the impact on the economy, especially after the effects seen on the US and European economy. As the US government is mulling to announce special stimulus package to control Coronavirus, murmurs are rising in India to cut interest rates in the next Reserve Bank of India's (RBI's) Monetary Policy Review. Taking suo motto cognizance of these developments the State Bank of India (SBI) has come forward and suggested the Indian Government on how to keep the Indian economy insulated from the Coronavirus impact.

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"The chorus of rate cuts by RBI to stimulate demand is only getting louder. We, however, believe that even though RBI might bite the bullet of cutting rates in forthcoming policy, it is unlikely to result in any material impact on invigorating demand. Our analysis of credit data of the top 6 banks, constituting three public sector banks and three Private Banks sector banks which are 52 per cent of total bank credit (as on Mar’19) over the last one year (Dec’19 over Dec’18) reveal interesting results. First, both Private Banks and PSBs are exhibiting robust growth in the retail segment, 15.7 per cent and 12.8 per cent respectively, indicating portfolio switch of retail loans is working both ways (Private Banks to PSBs and PSBs to Private Banks) as well as new retail credit," Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said on the measures that the Indian government needs to take.

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Ghosh said that in the case of top 8 PSBs, Corporate credit has exhibited a decline of Rs 81,535 crore during Dec’19 over Dec’18, while during the same period top  3 private banks’ corporate pie grew by Rs 1.04 lakh crore. This clearly explains portfolio switch in corporate credit portfolio from PSBs to Private Banks as PSBs. This indicates that incremental credit demand is largely in the retail segment, but in the Corporate segment, it is largely portfolio switch from PSBs to Private Banks.

"We believe, a combination of a larger rate cut (notwithstanding the dangers of further cut in deposit rate) and/or indirect tax rate cut could be the policy options with financial markets in an unprecedented global meltdown," Ghosh said.