Question

In the late 1960s, the Dahejia Committee flagged a significant distortion in commercial lending. What was their primary observation that eventually led to a stringent credit squeeze and the formation of the Tandon Committee?

Q: Answer-In the late 1960s, the Dahejia Committee flagged a significant distortion in commercial lending. Wha...

The text explains that the Dahejia Committee observed that bank credit to inventory grew disproportionately, exceeding the growth value of industrial production. This raised alarms that bank funds were being used for speculative hoarding of essential items rather than purely productive output, prompting the credit squeeze of 1973 and the subsequent appointment of the Tandon Committee.

A Banks were keeping excessive cash reserves without lending to the corporate sectors.

B The ratio of bank credit to inventory had grown disproportionately, indicating that funds were likely being used to hoard commodities for undue profits.

C Small and medium business units were getting an unfair share of credit compared to large public monopolies.

D Borrowers were defaulting on long-term project loans due to poor infrastructure planning.

E The operational cycle of industrial houses had shrunk to less than 30 days.

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In the late 1960s, the Dahejia Committee flagged a significant distortion in commercial lending. What was their primary observation that eventually led to a stringent credit squeeze and the formation of the Tandon Committee?

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