Unsustainable-Part 2

I picked this topic because I would like to put forward my views on the huge public debt this country(through banks) is forcefully creating. More succinctly, the government no longer needs money from banks and hence the banks are flush with funds. Now the prime role of the banks is to lend to various sectors of the economy and foster growth thereby also ensure that the economy is well insulated and healthy. Now RBI has to make sure the latter is ensured since the banking sector has been well privatized. The banks are not as cautious as the RBI since keeping funds idle is a sin for banks. The government insists that banks lend to the agriculture sector which is limping. Also welcome is lending to real estate sector which will indirectly aid development is so many interdependent industries. But now the banks are lending home loans enormously and what I would call unsustainably in the long run. Lending to agriculture sector always happens forcefully and rarely voluntarily!

The RBI has recently tried to curb risky loans to the commercial real estate sector with indication to banks of a possible threat that looms around home loans too! The repo rate hence has been slightly raised by .25. Dayanidhi maran a few days back had warned the realtors of falsely rising valuations in areas like coimbatore, madurai after Chennai! .

So going forward all these will definitely have impact on the inflation and cause an increase in domestic products. It’s very important that in a Globalised economy falsely hiking prices is prevented in all products so that for the public various essential commodities don’t become too costly. Such situations will drive towards a possible alarm and demand an immediate action from the regulator and perhaps force him to take strict measures. And will possibly induce a passive recession.

After all one might even travel in a highway but will have to slow down when there is an accident that’s happened before him!! :)