Speaking at the Gujarat Vibrant Summit, Patel said that steep interest rate subventions decreases safeguard against risks, especially when protection is given to people.
The central bank governor Urjit Patel on Wednesday cautioned the government on credit guarantees and interest rate subvention, reports Business Standard.
The government had recently raised the ceiling for credit guarantees on loans to small businesses to Rs 2 crore from the earlier Rs 1 crore. The Modi-led government also declared a 4 percent interest rate relief on housing loans of up to R 9 lakh and 3 percent on loans up to Rs 12 lakh.
Speaking at the Gujarat Vibrant Summit, Patel said that the steep interest rate subventions reduces safeguard against risks, especially when protection is given to people.
Patel further said that such guarantees need to be used judiciously. Credit guarantees can be used to solve issues to an extent and have limited utility.
India’s ability to improve its credit rating is limited because of the Centre’s high borrowing. According to the International Monetary Fund data, the country’s general deficit was the highest among the G20 countries.