Home / Knowledge / News / 'Repo rate could have been pruned further' - President, FICCI
'Repo rate could have been pruned further' - President, FICCI
21
Apr '09
Welcoming the reduction by the Reserve Bank in the repo rate and the reverse repo rate by 25 basis points in its annual credit and monetary policy statement for 2009-10, Mr. Harsh Pati Singhania, President, FICCI said “The cut in the repo rate could have been steeper because of the strong cushion provided by the extremely comfortable position with regard to inflation”.

Mr. Singhania said FICCI was also hoping for a cap by the RBI in the reverse repo rate to encourage banks to keep sufficient amount of funds with themselves for keeping the credit disbursal pipeline running unimpeded.

FICCI reiterates the need for a downward revision of the PLR of banks in line with the RBI policy rate movement. As mentioned in FICCI's recent Business Confidence Survey, the PLR of banks has reduced merely by 125 basis points as against a fall of 400 basis points in the repo rate.

The RBI has kept the CRR rate unchanged at 5%. In the interest of keeping the credit flow going, FICCI feels that the CRR could have been pruned further by 100 basis points.

FICCI has also hailed the announcement on deferring the application of Capital Risk-Weighted Assets Ratio (CRAR) of 12 per cent to NBFCs. This is a very welcome gesture as in the current scenario.

It would have been extremely difficult for these entities to raise additional resources. NBFCs are backbone of the system and major providers of risk capital to SMEs and they certainly need the right policy environment to continue playing a constructive role in economic development.

The Chamber has also welcomed the move to enhance the buy\back limit of FCCBs from current level of $ US 50 million to $ US 100 million. In the current environment this would help companies with internal accruals to manage their fund flow appropriately.

Federation of Indian Chambers of Commerce and Industry

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