Expectations of industrial fraternity and retail loan borrowers in Tirupur district for a cut in short-term bank rates have fallen like a symbolic pack of cards as RBI kept Repo rate (rate at which banks borrow from RBI) unchanged in the mid-quarter monetary police review unveiled on Monday.
“It is a great disappointment that the apex bank totally ignored the ‘feelings’ of the fund-starving industrial segments such as textiles at a time when the Index of Industrial Production (IIP) shows an abysmally low growth of 0.1 per cent in April,” S. Dhananjayan, an industry consultant and member of Institute of Chartered Accountants of India, told The Hindu .
Representatives of textile associations, G.R.Senthilvel of Tirupur Exporters and Manufacturers Association and A. Sakthivel of Tirupur Exporters Association, who were holding presumptions for at least 25 to 50 basis points cut on Repo rate in accordance with the economic forecasts, feel let down by the RBI.
“At present, the interest rates on working capital and term loans are very high following an upward revision of Repo rate on as many as 13 occasions since 2010 only to cut it by a bare minimum of 50 basis points this year.
“Unless the growth of the predominant small and medium scale enterprises in clusters such as Tirupur are ensured by making credit available at low interest rates, how the RBI is going to contain inflation and arrest the decelerating growth?” Mr. Senthilvel asked.
The Repo rate presently stands at a high of 8 per cent.
Even the RBI’s announcement to increase the limit of export credit refinance from 15 per cent of outstanding export credit of banks to 50 per cent, which will potentially release additional liquidity of Rs. 300 billion, did not bring much cheers to textile exporters.
“Instead of pumping in liquidity into the system, the need of the hour is to make more credit available at very cheap rates to enable capacity expansion in units,” industrialists pointed out.
People who are trying hard to have a home and car of their own too sounded disappointed that the short-term bank rates did not come down.
“The overall prosperity of the nation cannot be attained unless the middle and lower middle class people, who need loans more than anyone, are given an opportunity to access institutional credit at affordable rates,” P. Somasundaram, secretary of Consumer Voice, said.
