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Credit policy evokes mixed response

Agencies - Kolkata

The maiden credit policy announced by the RBI governor, Dr Y V Reddy has evoked a mixed response from leading chambers of commerce and industries.

While the Indian Chamber of Commerce (ICC) felt that the apex bank should have cut the bank rate further to spur industrial and economic growth, Bharat Chamber of Commerce (BCC) was of the opinion that the policy was silent on the burning issue of cross-subsidisation. The Merchants Chamber of Commerce (MCC) felt that the soft stance of the RBI policy might fail to kickstart the growth-impulse despite all the right indications. “Given the extremely positive economic environment, a bank rate cut of at least 50 basis points would have triggered a higher rate of industrial and economic growth,” the ICC president Mr Vikram Thapar said. The positive outlook in terms of industry performance, foreign exchange reserves, a resurgent capital market and increasing exports, in addition to current scenario in south east Asia and the pick-up in industrial activity indeed called for a reduction in interest rates, Mr Thapar said in a statement. He, however, welcomed Dr Reddy’s initiative to allow flexibility to exporters in respect of outstanding export dues as well as the normal period of realisation beyond 180 days and the steps taken to simplify procedures for SSI sector and credit delivery to agriculture sector.

The MCC president Mr K B Agarwal said the policy hardly contained any specific measures to boost economic growth and export promotion and felt that specific directions from RBI were needed to fix up PLR on realistic basis and cut the undue deposit-lending spread. In the background of favourable growth rate and low inflation rate, the FICCI chief said, “A further reduction in bank rate would have added further fuel to the economy’s growth engine.” The PHDCCI chief Mr Jain said RBI has not taken any step to reduce PLR and the benefit of softer interest rate regime has not passed on to “second-rung” borrowers. “Except AAA-rated borrowers, others have to borrow funds at 14 per cent. RBI should have evolved a mechanism to enable banks to fix their PLRs not exceeding a ceiling prescribed (by say 8.0 per cent), for all class of borrowers,” he said. FIEO said the RBI did not consider the suggestions submitted which included easy and adequate availability of pre-shipment credit in foreign currency, concessional rate for export finance for 360 days, rationalisation of slab rate of interest towards post-shipment credit in foreign currency and term loan and packing credit interests be at par for rationalisation.