Captains of Indian industry who met Reserve Bank Governor Shaktikanta Das on Thursday sought several sops including cut in repo rate, cash reserve ratio, more liquidity for financial sector, relaxation in the February 12 circular on loan recasts and lifting of curbs on banks under prompt corrective action (PCA) framework.
Industry chamber FICCI urged the RBI to consider cutting the repo rate and CRR to enable lowering of lending rates by banks. Sandip Somany, president, FICCI, said a reduction in the repo rate and CRR would help in reviving the investment cycle in the country and will also boost consumption and support growth. “The need of the hour is to have an accommodative monetary policy, focusing on growth. The objectives of the Monetary Policy committee should not be restricted to only price stability but also to consider growth and exchange rate stability,” Somany said.
Ideas to aid RBI, govt’s decision-making
Industry chambers had a freewheeling meeting with the Reserve Bank of India Governor Shaktikanta Das and impressed upon RBI the need to lower interest rates, inject more liquidity in the markets and ease certain rules to support growth. The meeting is crucial since it comes ahead of the Monetary Policy Committee’s policy review scheduled on February 7 and presentation of the Union Budget likely on February 1. With inflation remaining benign, the suggestions of industry chambers will aid the RBI’s and government’s decision-making process with regard to key policies and support measures.
ASSOCHAM president BK Goenka said, “In order to ensure a steady growth rate of 7.5 per cent, the economy needs credit loosening so that liquidity can sustain the growth. The fund raising capability of NBFCs/HFCs has reduced significantly, warranting support from the government. They need to be provided the alternate options for raising funds. This is imperative not just for the health of NBFCs/HFCs but for the sustaining the GDP growth rate as well.”
“Corporates are required to raise borrowings up to 25 per cent of their requirement through corporate bonds. After the recent developments, corporate bond trading has virtually come to a halt. The bond market can be supported by encouraging long term investors such as PF and insurance/ pension funds by participating in bonds market,” he said.
Confederation of Indian Industry (CII) suggested policy measures required to ease tight liquidity situation by effecting a cut in CRR rate of at least 50 basis points, measures to facilitate flow of credit to industry especially to MSMEs and infrastructure sector and address high cost of credit by considering reduction in repo rate of 50 basis points given that inflation has been consistently low.
On measures to address financial challenges faced by MSMEs, CII suggested that RBI consider limiting the collaterals sought by banks to 133 per cent of the exposure and eliminate the need for personal guarantees where sufficient collateral exists. It also suggested that Letter of Undertaking (LoUs) for Buyers’ Credit for such cases where MSMEs investing in expanding capacity may be permitted and RBI may consider allowing banks to sanction. On liquidity challenges faced by NBFCs, CII said the need to provide backstop facility to housing finance companies through the National Housing Bank and may extend the
same facility directly to the systemically important deposit taking NBFCs (NBFCs-D) along with providing refinance facility for mutual funds to address the liquidity challenges.
On the February 12 circular, CII said that while the circular was aimed at improving the credit discipline and early identification of probable defaults, it has however put pressure on already distressed sectors impacted.