The Confederation of Indian Industry (CII) which, along with other industry bodies, met Reserve Bank of India Governor Shaktikanta Das on Thursday, suggested a 50 bps (basis points) reduction in cash reserve ratio (CRR) requirements of banks to ease the liquidity situation and a similar reduction in the repo rate to address high cost of credit, particularly to the micro, small and medium enterprises and infrastructure sector.
The meeting was a part of the consultative process with all the stakeholders of the economy that Mr. Das initiated after taking charge in December.
The Reserve Bank’s next monetary policy review is due on February 7. On liquidity challenges faced by NBFCs, the CII highlighted the need to provide backstop facility to housing finance companies through the National Housing Bank.
Facility to NBFCs
It also wanted the central bank to extend the same facility directly to the systemically-important deposit-taking NBFCs along with providing refinance facility for mutual funds to address the liquidity challenges. The industry body also suggested a separate classification for “exceptionally large NBFCs” and an open liquidity window similar to banks.
On the RBI’s controversial circular of asking banks to start resolution of assets even in the case of one-day default, the CII said the circular had put pressure on the already distressed sectors impacted due to business performance reasons and hence, should be given sufficient time to resolve the defaults.
