As I mentioned above, commercial banks have always been a large source of finance for the sector. It must be understood that the macroeconomic policies do play a very limited role in flow of funds to specific sectors. RBI’s monetary and liquidity measures have an overarching objective of managing the inflation expectations and liquidity conditions in the market.
The interest rate in the system is a function of an entire set of factors with inflation being one of the primary ones. Therefore, if the lending cost has not come down appreciably in the banking system, it is on account of persistent high levels of inflation. 28.