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India is confronting the fifth straight quarter of slipping economic growth. The private investments in India are considerably not adequate in volume to support the economy’s growth momentum to remain on the positive side. Hence, the government might come under pressure to take the necessary steps to keep the economy running. Especially during the current financial year, the government is contemplating on several measures to boost up the slumping economic growth. One such measure could be similar to what is known as <keyword id="82936" type="ORGANIZATION" weightage="20" keywordseo="TARP">TARP</keyword>. Here we try to understand <keyword id="8418297" type="UNKNOWN" weightage="20" keywordseo="what-is-tarp">what is TARP</keyword> and the scenario in the country that is making India talk about TARP right now. What is TARP? TARP, expanded as the <keyword id="431208" type="ORGANIZATION" weightage="20" keywordseo="Troubled-Asset-Relief-Program">Troubled Asset Relief Program</keyword> was an innovative measure launched by the U.S. Treasury in order to stabilize the financial system of the country, restore the growth of economy and prevent foreclosures during the wake of the financial crisis that struck the US in 2008. TARP achieved these above mentioned targets by purchasing the stocks and assets of the troubled companies. 2008 Financial crisis striking the US credit market In September 2008, credit markets across the globe came to a standstill and a severe financial crisis took over major money lending companies like Fannie Mae, Freddie Mac, and American International Group (AIG). Companies like Lehman Brothers filed for bankruptcy. For stabilizing their capital situation, investment entities like Goldman Sachs and Morgan Stanley altered their charters to turn into commercial banks. TARP was a solution innovated by the US In order to ease the situation, stabilize the financial situation and support the slumping economy, the US launched the Troubled Asset Relief Program (TARP) through which the US government bought mortgage-backed securities and bank stocks. Through TARP, the US government invested $426.4 billion in companies and recouped $441.7 billion in return in two years. The need for US to contemplate on TARP With the financial system in the country seeming to spiral out of control during those days, the Treasury Secretary of the US Henry Paulson brought out the Troubled Asset Relief Program (TARP). On October 3, 2008, President George W. Bush signed TARP into law leading to the passing of the Emergency Economic Stabilization Act. TARP was a controversial move during those days. Till date the effectiveness of TARP is being debated. Supporters of TARP say it helped save the US economy and shorten the severe financial crisis. On the other hand, the critics of TARP say it only gave a no-strings boost to Wall Street. Will India go for a program similar to TARP now? In a recent press meet, the RBI governor gave a hint that a program similar to that of TARP could be thought of by the government in India also. However, he did not explicitly say if RBI was considering a similar move. TARP during 2008 in the US could prevent the collapse of some of America’s marquee banks. If something like TARP could come through in India, the resulting surplus liquidity might ease the financial situation.

What Is TARP And Why Is India Discussing It Right Now

<ul><li>RBI shocks the street by leaving interest rates unchanged contrary to market expectations. </li><li>The decision to hold interest rates was triggered by the recent spike in inflation. </li><li>RBI has already cut interest rates five times this year but the lending rates offered by banks have come down much lesser.</li></ul>The Reserve Bank of India shocks the street by leaving interest rates unchanged contrary to market expectations. The decision to hold interest rates was triggered by the recent spike in inflation. RBI has already cut interest rates five times this year but the lending rates offered by banks have come down much lesser. Repo rate, the interest that the RBI charges banks for lending money to them, is already at a ten-year low. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 These are the top highlights of his speech today after the monetary policy meeting. 1. India's real GDP growth estimate cut to 5% for the full-year ending March 2020. 2. The decision to leave interest rate unchanged was 'unanimous'. 3. Since the October meeting, global economic condition has been subdued though there are some signs of resilience. 4. Rabi sowing (the winter crop) was down only 5% by November 29 compared to a year ago. This signals recovery according to the monetary policy panel. <div type="Article" hostid="261" msid="72378620" title="Food inflation will be very high from January to March 2020, warns RBI governor as he keeps interest rates unchanged" mstype="2" mssubtype="0"></div>

 5. Governor Das cited the improvement in manufacturing PMI as a sign of economic recovery. 6. Net foreign direct investment rose 17% in the first half of the fiscal year and the net foreign portfolio investments (money invested in shares and bonds) were over $8 billion at the end of November compared to a net outflow a year earlier. 7. Manufacturing firms expect weak demand in the October-December quarter and fear further erosion of pricing power. 8. Economic activity has weakened further but a lot of steps already taken by the government and the RBI will help improve the economy. 9. The forthcoming budget will also provide further insight into the government's efforts to improve the economic growth. The monetary policy panel decided it was prudent to pause at this stage and wait for data and government's policy measures. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 10. There is space further available for monetary policy actions but there is a need to optimise the impact of the interest rate cuts. We should give more time for the banks to pass on the interest rate cuts provided so far. The timing of the next rate cut will also be important. 11. On-tap licensing guidelines for small finance banks will be issued today. 12. Food inflation will remain very high in January to March, warns RBI governor. 13. The price rise of food items will come down to 3.8% between April and June 2020. 14. There is also surplus liquidity in the system. RBI is absorbing about ₹2.5 lakh crore ($35 billion) everyday. Quantitative easing was the same policy adopted by the central banks in developed economies like the US and Europe after the global financial crisis brought the credit market to a grinding halt. In India too, right now, risk-averse banks prefer to keep the money in safes instead of risking it in the form of loans, especially to the crippled non-banking financial companies. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 However, the governor kept the suspense alive on the question whether the RBI was considering a programme like the TARP (Troubled Asset Relief Programme) in the US where the federal funds went into purchasing stock in banks, insurance companies, and auto-makers, and to loan funds to financial institutions and to homeowners. This was brought in 2008 to save some of America's marquee banks-- Bank of America/Merrill Lynch, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, State Street, and Wells Fargo-- from collapsing in the aftermath of the financial crisis of 2008. "I also read it in the paper. Let me leave it at that," RBI Governor Das said. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Top highlights from RBI Governor Shaktikanta Das' speech after the credit policy review

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What Is TARP And Why Is India Discussing It Right Now

BI India Bureau

Top highlights from RBI Governor Shaktikanta Das' speech after the credit policy review

Sriram Iyer

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