Home / Industry / Banking /  CII asks RBI to cut repo rate, cash reserve ratio

Mumbai: Industry lobby group Confederation of Indian Industry (CII) on Thursday requested the Reserve Bank of India (RBI) to reduce the repo rate and cash reserve ratio (CRR) by 50 basis points (bps) each, among various measures aimed to ease liquidity for borrowers.

A CII delegation led by Uday Kotak and Adi Godrej that met Reserve Bank of India governor Shaktikanta Das, also sought a backstop facility to address liquidity challenges in housing finance companies and deposit-taking non-banking financial companies (NBFCs), besides a refinance facility for mutual funds. It also suggested considering removal of personal guarantees where sufficient collateral exists.

“CII suggested that RBI consider limiting the collaterals sought by banks to 133% of the exposure and eliminate the need for personal guarantees where sufficient collateral exists," a CII spokesperson said.

“CII also suggested that letters of undertaking (LoUs) for buyers’ credit for such cases where the MSMEs investing in expanding capacity may be permitted and RBI may consider allowing banks to sanction buyers’ credit facility to MSMEs, wherever import of raw materials is being done under letter of credit," he added.

The delegation also sought more time to resolve defaults as mandated by RBI’s 12 February 2018 circular. It recommended that RBI may revisit the lending restrictions of banks under its prompt corrective action (PCA) framework and consider allowing them to lend to National Housing Bank which, in turn, can be used to finance housing projects through housing finance companies.

In order to address funding issues in infrastructure, CII called for suitable intervention such as implementation of debt resolution plans and inter-creditor agreements on an urgent basis, and enhancing opportunities for refinancing, takeout finance and credit enhancement by expanding capital base and operations of India Infrastructure Finance Co. Ltd and National Investment and Infrastructure Fund.

After taking over as the 25th governor of the RBI last month, Shaktikanta Das has been holding meetings with various stakeholders including banks, NBFCs and MSMEs.

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