‘Credit channel of monetary policy transmission robust in India’
Mumbai |
Updated on
Our Bureau
The credit channel of monetary policy transmission is robust in India, according to a Reserve Bank of India (RBI) working paper.
“Its efficacy, however, is impaired if there is a deterioration in asset quality but is reinforced by better capital position of banks,” the paper said.
The paper assessed that an increase (decrease) in policy rate by 100 basis points causes the credit to decline (increase) by 1.95 per cent with a lag of six quarters, validating the existence of a robust credit channel of monetary transmission in India.