By Kunal Kumar Kundu The Reserve Bank of ndia and !he Minis!ry of "inan#e haven$! seen eye !o eye on mone!ary poli#y for some !ime% The &overnmen! 'an!s !he #en!ral (ank !o ease mone!ary poli#y fas!er, 'hile !he RB 'an!s )e' *elhi !o prove i! is fis#ally responsi(le% The #en!ral (ank has a#!ually eased +ui!e a (i!, #u!!in& !he repo ra!e ,!he ra!e a! 'hi#h (anks (orro'- (y 1. (e!'een April 2012 and Mar#h 2013% ! has also #u! !he #ash reserve ra!io ,!he per#en!a&e of deposi!s !ha! (anks have !o keep 'i!h !he RB and on 'hi#h !hey earn no in!eres!- (y 1%/. and !he s!a!u!ory li+uidi!y ra!io ,money #ommer#ial (anks mus! keep in #ash, &old or &overnmen! au!hori0ed se#uri!ies- (y 1.% Bu! !his hasn$! led !o (i& #u!s in lendin& ra!es (y #ommer#ial (anks% Resear#h firm 121 *a!a says !he (en#hmark lendin& ra!e of 3!a!e Bank of ndia /00112%B4 51%2/. and 6*"1 Bank dropped 7us! 0%3. from April !o Mar#h, 'hile11 Bank /32189%B4 50%/1. $s fell 0%2/. and A:is Bank /3221/%B4 52%/9. $s didn$! #han&e a! all% 2ven !hou&h !he repo ra!e and !he 1RR have dropped, !he #os! of funds of !he (anks hasn$! fallen enou&h !o 'arran! (i&&er ra!e #u!s% This #an (e a!!ri(u!ed !o an asse! lia(ili!y misma!#h and risin& levels of ndian (anks$ non;performin& asse!s% ndia Ra!in&s says !he refinan#in& risk of (anks has (een &ro'in&, par!i#ularly for &overnmen! (anks, as lon&;!erm loans have in#reasin&ly (een finan#ed (y shor!;!erm deposi!s% The risk is par!ly mi!i&a!ed (y (anks$ solid domes!i# re!ail deposi!or (ase, (u! !he hi&h pa#e of refinan#in& s+uee0es +uar!er;end li+uidi!y, keeps fundin& #os!s eleva!ed and delays !he !ransmission of any poli#y ra!e #u! !o (orro'ers% A##ordin& !o !he RB, as of Mar#h 31, 2012, !he num(er of si#k ,'hen a##umula!ed loss e+uals or e:#eeds ne! 'or!h- mi#ro;, small; and medium;si0ed en!erprises s!ood a! </,/91, 'i!h ou!s!andin& loans !o!alin& =8%9 (illion rupees ,>1%2 (illion%- The si!ua!ion likely 'orsened las! year% A s!udy (y )?Asour#e%#om said !he &ross non;performin& asse!s of ndian (anks 'ere a! /30 (illion rupees as of 3ep!% 30, up nearly 9=. from a year earlier% "i!#h Ra!in&s has 'arned !ha! !he &ross non;performin& asse!s of !he ndian (ankin& sys!em #ould have !ou#hed 9%2. of advan#es las! finan#ial year% Tha! 'ould (e !he hi&hes! sin#e 2009;0/, 'hen !he ra!io s!ood a! /%2.% Ra!in& do'n&rades of ndian #ompanies far e:#eeded up&rades las! year% 1risil, for e:ample, said on avera&e i! up&raded =9 #ompanies for every 100 do'n&rades% 1RA up&raded 3< #ompanies for every 100 do'n&rades% 2ven af!er !he up&rades, many 'ere s!ill ra!ed non;inves!men! &rade% *elays in !he implemen!a!ion of indus!rial pro7e#!s have promp!ed (anks havin& !o raise !heir provisionin& re+uiremen!s as #ompanies are less likely !o (e in a posi!ion !o repay loans% A Mar#h 21 repor! in The Times of ndia, #i!in& da!a #ompiled (y s!a!e;run (anks, sho's !ha! 21/ pro7e#!s, ea#h involvin& inves!men! of 2%/ (illion rupees or more, are s!u#k a! differen! s!a&es of #omple!ion% ?u(li# se#!or (anks have already dis(ursed loans amoun!in& !o /90 (illion rupees for !hese pro7e#!s% This 'eakens !he posi!ion of (anks, and slo's !he !ransmission of mone!ary poli#y a#!ion on!o !he lendin& ra!e% The author is an economist based in New Delhi. These are his personal views. For more from Mr. Kundu, go to his website. Follow India Real Time on Twitter indiarealtime.