There has been broad agreement between the Government and the RBI on the above approach, and accordingly, subsidies on interest rates through the banking system to small farmers and small exporters are currently provided for a limited period. There are several Governmentsponsored programmes intended for the vulnerable sections and these are small-sized loans for which Government provides subsidy, particularly for employment generation.
Thus, the financial sector, in particular the banking system, is utilised as a conduit by the Government’s fiscal policy, to subsidise select activities or vulnerable sections, and RBI plays a supporting role in enabling such measures while emphasising the longer term goals of a conducive credit culture.