Assocham urges RBI to increase bank liquidity

January 17, 2011 10:24 pm | Updated January 18, 2011 12:16 am IST - NEW DELHI:

The Associated Chambers of Commerce and Industry of India (Assocham) on Monday cautioned the Reserve Bank of India (RBI) against any attempt at tightening its monetary policy and maintained that the need of the hour was to increase bank liquidity and sustain credit growth in the face of the unprecedented rise in the inflation rate.

Assocham President Dilip Modi urged the RBI to reduce its rates by 50 basis points so as to provide banks with an additional Rs.21,000 crore of liquidity.

He contended that liquidity was a pre-requisite for achieving the 9 per cent plus growth rate during the current fiscal and also pointed out that banks had already pleaded for reduction in CRR and SLR to make available more funds due to spurt in credit offtake and also because they were facing reduced deposit growth.

Mr. Dilip said that funds and lower cost of funds were necessary to create large and improved supply-chain infrastructure, capacity building as well as innovation to address the demand and supply mismatch.

Any meddling with the policy rates, he warned, would derail the growth trajectory and recommended removing supply constraints and enforcing reforms in critical sectors and preparing the country for higher growth challenges.

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