Nov. 3: The industry expressed mixed reactions today over Reserve Bank governor Y. V. Reddy’s maiden credit policy. While welcoming the announcements on benchmark PLR, improvement in credit delivery and customer service, leading industry chambers, CII, Ficci, Assocham and PHDCCI said the RBI could have ensured a further lowering of lending rates.
The industry said that the RBI can opt for a cut in bank rate and cash reserve ratio in February before the budget to ensure higher credit flow to agriculture, SSI and export sectors to spur economic growth.
FIEO expressed disappointment over the policy, saying: “No measures have been announced to support export sector except a few procedural changes in the exchange control manual. RBI has lost an opportunity to send a positive signal to exporters.”
It said the RBI did not consider the suggestions submitted which included easy and adequate availability of pre-shipment credit in foreign currency, concessional rate for export finance for 360 days, rationalisation of slab rate of interest towards post shipment credit in foreign currency and term-loan and packing credit interests be at par for rationalisation.
“The RBI could have ensured that the lending rates for borrowers across the wide spectrum also fall to lower levels,” Ficci chief Y. K. Modi said, adding the lending rates to SME sector have not come in tune with the reduction in PLR.
CII supported the move to keep bank rate unchanged due to presence of excess liquidity. President Anand Mahindra said, “If RBI chooses to reduce the bank rate as well as CRR, it can do so later, preferably prior to the budget.”
Assocham President R. K. Somany said, “Definite policy measures should have been taken to reduce the risk averseness of bankers while disbursing loans to agri and SMEs.” The RBI could have taken measures to reduce the gap in deposit rates in the country and abroad, he added.
PHDCCI president P. K. Jain said, “The RBI should have cut bank rate and CRR by at least 0.50 per cent.”
“Except AAA-rated borrowers, other have to borrow funds at 14 per cent. The RBI should have evolved a mechanism to enable banks to fix their PLRs not exceeding a ceiling prescribed (by say 8 per cent), for all class of borrowers,” he added.
Vikram Thapar. president of Indian Chamber of Commerce and Industry, said that given the extremely positive economic environment, a bank rate cut of at least 50 basis points would have triggered a higher rate of industrial and economic growth.
The ICC chief said that the positive outlook in terms of industry performance, foreign exchange reserves, a resurgent capital market and increasing exports indeed called for a reduction in interest rates.
The chambers welcomed RBI governor’s initiative to allow flexibility to exporters in respect of outstanding export dues as well as the normal period of respect of outstanding export dues as well as the normal period realisation beyond 180 days. The proposal for setting up a special monitoring system for setting important financial intermediaries in co-ordination with the RBI, Sebi and IRDA is a positive step, the chambers felt.
K. B. Agarwala, president of Merchants’ Chamber of Commerce, said that the policy hardly contains any specific measures to boost growth and export promotion, except the elements of continuity with the soft interest rates, expansion of prudential norms and advice to the banks to benchmark prime-lending rate and facilitate credit flow to agriculture and small scale sectors.
The chambers felt that RBI’s projection of GDP growth at 6.5 to 7 per cent with an upward bias, reflected the optimism in the economy and, this together with the downward pressure on inflation would create the right environment for growth.
. R. Goenka, president, Bharat Chamber of Commerce, said: “The decision to authorise banks to increase the loan limit from Rs 15 lakh up to Rs 25 lakh to SSIs for dispensation of collateral requirement is welcome as it would help mitigate the financial difficulties confronting the SSI sector.”