The Hindu : Business : Industry seeks cut in CRR

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Friday, Oct 10, 2008
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Business

Industry seeks cut in CRR

Special Correspondent

Relaxation in ECB norms, removal of interest rate cap on NRI deposits sought
Higher investment limit in corporate debt market suggested

NEW DELHI: In almost identical statements by various chambers, industry has suggested that the Government should inject Rs. 1,00,000 crore as fresh funds by way of reduction in the CRR (cash reserve ratio) and the repo rate to infuse adequate liquidity in the economy and thereby ensure India’s insulation from the global financial meltdown.

As business confidence is at a new low in recent times, apex chamber Federation of Indian Chambers of Commerce and Industry (FICCI) has appealed to the Government and the Reserve Bank of India (RBI) to urgently consider a reduction in the CRR by 100 basis points and the repo rate by 150 basis points to bring both down to about 7.5 per cent over the next three months so as to release more liquidity into the monetary system.

Alongside, it has suggested a slew of other measures such as easing of registration norms, a re-look at the participatory notes (PN) policy and a further hike in the limit on investments in the corporate debt market so as to induce higher inflows by foreign institutional investors (FIIs).

Associated Chambers of Commerce and Industry of India (Assocham) has also appealed to the Prime Minister to immediately initiate steps to infuse Rs. 1,00,000 crore liquidity so as to ensure adequate availability of credit. FIIs, it said, should be encouraged to invest in Indian corporate bonds beyond the current cap of $10 billion with a one-year lock-in period.

Exclusive fund

Likewise, the Confederation of Indian Industry (CII) has demanded Rs. 1,00,000 crore to provide liquidity into the system along with a further relaxation in the norms for external commercial borrowings (ECBs) and removal of the interest rate cap on NRI (non-resident Indian) deposits.

“While the recent relaxations of ECB guidelines for companies in the infrastructure sector are welcome, the Government must allow all companies that are investing in new capacities to access foreign debt,” it said.

The chamber further suggested that all projects with cost exceeding $500 million should be permitted to borrow up to $150 million through the ECB route for meeting rupee capital expenditure.

It also sought the setting up of an exclusive fund for creating liquidity in the capital market.

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