The recent cut in cash reserve ratio (CRR) was clearly not appealing enough to Finance Ministry. For it wanted more. A cut in repo rate would have meant pressure on banks to cut lending rates. If not private sector at least the PSU ones. The lower rates could have in turn offered a feel good sentiment about GDP growth prospects. Alas, none of that materialized!

But worth noting that even the 0.25% CRR cut offered additional liquidity to the tune of Rs 175 bn to banking system. Just that very little may find its way into banks' loan books. At least the historical data suggests so. In 1HFY13, bank credit has grown just 4.3% YoY. During this period, deposits and SLR investments have grown by 8.5% and 14.8% YoY respectively. This shows that the allocation of funds is skewed towards investments in government bonds. One reason for this could be that banks are apprehensive of loans turning bad. Hence the reluctance to lend aggressively. The other may be that the demand for capex related credit itself has dried up. Whatever the cause may be, the government seems to be the biggest beneficiary of the RBI's policy of gradually easing. Whether or not its fiscal consolidation plan works or not, the government has plenty of takers for its bonds amongst Indian banks. We wonder then what Mr FM is complaining about?