C Rangarajan seeks views of bankers to boost investment climate

India’s top bankers, the insurance industry and mutual funds have sought definitive measures from the government to improve investment climate and boost growth.

In a meeting with C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC), bankers pointed out that government policies were constraining many sectors leading to a rise in their non-performing loans.

“A whole lot of focus was on investment climate, what needs to be done around projects to get the investment moving and to bring the flow of foreign funds into India ,” said Chanda Kochar, MD of ICICI Bank, after the meeting.

Though the consultations were largely in view of the PMEAC’s economic review expected in August , but have risen in importance after Manmohan Singh took charge of the finance ministry last month. Rangarajan is consulted by the Prime Minister on all important economic policy matters and is expected to play a much bigger role as the PM tries to put the economy back on track.

The former RBI governor had met industry representatives on Monday to seek their inputs. Rangarajan is not in favour of fiscal stimulus and wants inflation to moderate before interest rates can be lowered. “All of us shared our concerns from the mutual funds industry, the life insurance industry and the banking industry ,” said Alok K Misra, chairman , Indian Banks’ Association (IBA), after the meeting.

“We told him that projects at this point of time are not coming, something had to be done, investors’ sentiment should improve and the cost should come down. Sanctions (to projects) should be made faster,” he added. India’s GDP growth dropped to a nine-year low of 6.5 per cent in 2011-12 and current account deficit worsened to 4.2 per cent of GDP, resulting in a sharp depreciation of the rupee. Bankers suggested liquidity easing measures such as a cut in cash reserve ratio, which would free up funds for the banking sector. The RBI had maintained a status quo on policy rates in its meeting on June 17. It will take stock of monetary policy again on July 31.