RBI asked to cut lending rates, boost liquidity

NEW DELHI: In order to pump liquidity into the market, an industry lobby on Thursday requested the central Reserve Bank of India (RBI) to reduce cash reserve ratio and repo rate by 1 per cent.

In its recommendation, the Associated Chambers of Commerce and Industry of India (Assocham) has requested RBI to permit banks to borrow against government securities and provide dollars directly to oil companies, rather than routing them through the market for buying crude.

The recommendations submitted to the RBI governor by Assocham president Sajjan Jindal further said several Indian companies are now looking at rupee-funding as dollar-financing has become uncertain and difficult to raise within the RBI approved spreads.

Assocham said the level of credit needed to be redefined taking into account the base effect while planning for the future, instead of squeezing credit, which would seriously impact the survival and sustenance of industry.

Currently, the cost of money at which Indian industry borrows varies between 25-28 percent, which it said "is very high, as a result of which its margins have already shrunk".

The chamber has also sought easing of norms that govern external commercial borrowings to help industry raise funds from abroad.