Govt pushes back on key Reserve Bank proposals fearing hit to credit growth

The Indian government is pushing back on two key proposals of the central bank, which will require banks to set aside more funds for infrastructure projects and hold more liquid assets against online deposits, according to a government source.

Large parts of Asia's third-largest economy rely on bank financing with lenders' credit growing at nearly 14% over the past year, Reuters reported.

The Reserve Bank of India (RBI) in May proposed banks set aside 5% of the loans given to infrastructure projects that are under construction, pushing banks to approach the government on concerns over a rise in the cost of funding such projects.