NEW DELHI, 4 Oct. 2019, (GNI): Welcoming 25 basis points cut in the policy interest rate to 5.15 per cent by the RBI, the ASSOCHAM President Mr B K Goenka today said given a sharp drop in the GDP growth estimates for the current fiscal by the RBI itself from 6.9 per cent to 6.1 per cent, all-out efforts must be made to ensure significant transmission of the reduction in the interest rates by banks at the ground level.
”The RBI Monetary Policy has rightly deliberated the challenges to growth, both internal and external. The MPC has also examined how the pricing power of the manufacturer has been reduced, given the demand compression even as inflation remains quite benign. Besides, the global economy, as highlighted by RBI Governor Mr Shaktikanta Das , has further lost momentum. Under these circumstances, both fiscal and monetary policy measures are paramount to revive the demand push and investment in the economy,” said Mr Goenka.
He said, ”In this backdrop, the cumulative interest rate reduction of 135 basis points since February this year could be a critical push factor, provided the transmission by banks takes place in full earnest. However, the transmission , despite repeated nudging by the RBI and the government has not been commensurate with the rate cut and the prevailing low demand situation,” said the ASSOCHAM President.
Mr Goenka said, although there is a further scope for the cut in the interest rates , at least by 50 basis points in the wake of real interest rates still being high, the ” industry would expect availablility of credit at low cost which should result from the banks adjusting their spread, especially after linkage of their rates with external benchmarks like REPO rates. The onoing festive season should be leveraged by increasing credit growth to push demand and we would urge the RBI to keep nudging the banks for better transmission of lower rates”.
The ASSOCHAM President also lauded the RBI Governor to give an assurance about the Indian banking sector remaining sound and stable, allaying certain recent concerns in the financial markets.
ASSOCHAM Senior Vice President Dr Niranjan Hiranandani said, further cut in interest rates should result in lower lending rates for sectors like housing, commercial real estate, automobile, consumer durables . But the taste of pudding lies in eating. ” Demand in all these critical areas can be revived if an aggressive push is given to credit availability at lower rates”.
Dr Hiranandani said , “at this point of time the banking system is flush with liquidity. Thus , there is an ample reason for the credit growth to pick up momentum. As the RBI itself has taken concerns on slower growth of credit this fiscal, the trend must reverse . Along with fiscal measures taken by the government, consumer confidence and investor sentiment must revive ; but may take a little lag”.
He said, the NBFCs should be given more liquidity by the banks, although the banks, have of late, started lending to a few of the large non-banking finance companies. The NBFCs have played a critical role in the Indian financial system and should be helped to tide over the current crisis,Dr Hiranandani said.
About :ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. It was established by promoter Chambers, representing all regions of India. Having in its fold over 400 Chambers and Trade Associations, and serving over 4.5 lakh members across India. ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the Knowledge Based Economy. More information available on www.assocham.or