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Despite RBI's efforts, why are banks not lending money?

Banks have become risk-averse and they might have become more rigorous with their credit evaluation procedure, says Dhirendra Kumar

RBI has recently enhanced liquidity. But despite that, why are banks not lending money to individual borrowers?
- Deepak Ramaswamy

Like you and me, banks have also become risk-averse. Even though RBI has enhanced liquidity, banks are happily putting money at 3.35 per cent of reverse repo rate. They don't want to take any chances and make sure that they will get the principal and interest on time. Hence, they might be more rigorous with their credit evaluation procedure.

Although RBI has enabled liquidity, it does not ensure that banks will give loans to consumers. So, we really need to get back to normalcy. Normalcy in the sense that people need to start getting back to work, they should be getting salaries on time, businesses to which banks are lending should find enough customers for their product and so on. This cycle has to start. And once normalcy is restored, I think the lending and borrowing cycle will resume.

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