Relevance of Five Per Cent Rule

THE Reserve Bank, by a clarification, has permitted banks to grant medium-1 term loans in excess of 5 per cent of their deposits. Given deposits of over Rs 4000 crores, this would imply a permission to banks to lend about Rs 200 crores on term basis. The Reserve Bank's policy on term loans by banks has hardly been consistent. Text-books of the thirties abounded in criticisms of banks for following the British model and not lending to industry for