Arun Jaitley asks banks to cut interest rates

Mumbai: The fragile relationship between finance minister Arun Jaitley and the RBI governor Raghuram Rajan was reflected in Mr Jaitley calling the bank chairman for a meeting next Friday to explain why they were not passing on the successive rate cuts, totally 0 .75 per cent, to the borrowers.

This was really the job of the Reserve Bank of India (RBI), specially since in the earlier credit policy Dr Rajan had said he would have to look into why institutions were not passing on the rate cut. In his latest credit policy announcement on June 2, Dr Rajan merely said that banks should pass on the rate cuts.

The under current of  turf wars is also reflected in Dr Rajan suggesting how the government should have a contingency plans for food management, including storage of adequate quantity for timely supply, crop insurance schemes, credit facilities, timely release of food stocks and the repair of disruptions in food supply chains. Inflation control will also be helped by limiting the increase in agricultural support prices.