New Delhi: With industry posting a negative growth in October and marginal improvement in November 2008, corporates have asked RBI to signal further cut in interest rates by banks in its forthcoming monetary review on 27 January as their costs of funds are still too high, a survey said.
About 78% of the 150 CEOs surveyed said the previous cuts by RBI could not improve their financing situation due to unwillingness by the banks to lend money, industry body Assocham said.
Since October last year, RBI, in a slew of measures to inject liquidity into the economy, has brought down the cash reserve ratio (mandatory deposits banks need to park with the apex bank) from 9% to 5.5%, while the repo rate (rate at which banks take loans from RBI) is slashed from 9% to 5%.
Emphasising on the need to further cut the lending rate, the chamber said there is a huge scope of slashing the lending rates by the banks as the banking sector has recorded an impressive growth in the net interest income, it said.
The net interest income has risen by 37% during the third quarter of the fiscal.
According to the survey on the quarterly results of 15 banks, it was found that their net profit has jumped by 52% in the third quarter.
The industry said that repo rate should be slashed to 3% to induce the banks to cut their lending rates.
“Slashing of policy rates need to be supported by effective credit delivery to industry suffering from high financing costs, credit squeeze, lower consumer spending and falling global demand,” Assocham president Sajjan Jindal said.
Citing the figures of IIP, it said the RBI’s efforts have not really taken off to boost the manufacturing activity.
The IIP figure for the April-November 2008-09 was 3.9% as compared to 9.2% in the same period year ago.