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India Inc urges RBI to cut interest rate, lower CRR to boost growth
Jan-18-2019

Ahead of the sixth bi-monthly monetary policy statement for 2018-19, India Inc has urged the Reserve Bank of India (RBI) to cut its benchmark interest rate and lower the cash reserve ratio (CRR) to boost growth. It suggested various measures to ease tight liquidity situation and reduce high cost of credit in the light of consistently falling inflation.

The Confederation of Indian Industry (CII) suggested the policy measures required to ease the tight liquidity situation by effecting a cut in cash reserve ratio (CRR) by at least 50 basis points (bps), measures to facilitate flow of credit to industry, especially to micro, small and medium enterprises (MSMEs) and the infrastructure sector, and steps to address the high cost of credit by considering a reduction of 50 bps in repo rate given that inflation has been consistently low. On measures to address the financial challenges faced by the MSMEs, CII suggested that the RBI consider limiting the collaterals sought by banks to 133 percent of the exposure and eliminate the need for personal guarantees where sufficient collateral exists.

Meanwhile, the Federation of Indian Chambers of Commerce and Industry (FICCI) also made a pitch for cutting the repo rate and CRR to enable lowering of lending rates by banks. It believed that a reduction in repo rate and CRR would help in reviving the investment cycle in the country and will also boost consumption and support growth. It stated that the need of the hour is to have an accommodative monetary policy, focusing on growth. It added that the objectives of the Monetary Policy Committee should not be restricted to only price stability but also to consider growth and exchange rate stability.

The Associated Chambers of Commerce and Industry of India (Assocham) suggested that the economy needs credit loosening so that liquidity can sustain the growth. It noted that the fundraising capability of NBFCs/HFCs has reduced significantly, warranting support from the government. It noted that they need to be provided the alternate options for raising funds. It added that this is imperative not just for the health of NBFCs/HFCs but for sustaining the GDP growth rate as well.


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