We don’t learn from our mistakes
Government has been putting pressure on banks to reduce the interest rates through the Finance Minster (FM) Chidabaram. Public sector banks seccumbed to the pressure and agreed but private banks were reluctant. It is surprising that FM has not learnt that it was politician’s pressure that pushed the two US housing companies to give credit for home loans which were risky and landed everybody in financial trouble and global recession. We should push any bank to lend more by assuming risk that they do not want to assume. The government can create conditions like lowering of CRR etc. which will encourage the banks to reduce interest rates and start lending. I am sure competitive forces will come into play and one of the banks will see the opportunity and will reduce rates. Once this happens other will follow or lose business.
The best example that supports what I am saying is the airline industry. Kingfisher and Jet are not reducing prices in spite of the tremendous drop in the oil prices. However, SpiceJet and other smaller airlines are looking at the low oil prices as an opportunity. They have reduced prices and also done away with the congestion charge. Ultimately, when Jet and Kingfisher find that they are losing business, they will also reduce prices.
So the best thing for FM to do is create the environment to encourage the banks to reduce interest rates and lend more rather than push them to do so.
avinash narula
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we should learn from our mistakes because if we not learn from our mistakes than we will never improve our future. to creat a good future we should learn from our mistake and do something in different way.
Now the Prime Minister’s Office (PMO) is telling the airlines not to sack employees stating that the government’s bailout package for airlines was to save the jobs. I think it would be unrealitic for the PMO to think that just because of the bailout package, the airlines can indefinitely keep the employees on roll in spite of the deteriorating economic conditions. Government should take the right decisions to create a level playing field. They should have rationlized the ATF prices and taxes to make airline travel cheaper and also to enable the airlines to compete effectively. We have already seen positive effects of rationalization of ATF prices. Airlines like SpiceJet have reduced prices and it was reported that it is going to start hiring also.
Government cannot interfere with the businesses decisions of businesses.
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