Prime Minister's top economic advisor C Rangarajan today gathered views from banking, mutual funds and insurance industries on ways to boost investment climate in the country.
Rangarajan, Chairman of the PM Economic Advisory Council (PMEAC), had met representatives of India Inc yesterday amid rising concerns of slowdown and sluggish business activities.
These meetings are taking place in the backdrop of Prime Minister Manmohan Singh seeking revival of "animal spirit" in the economy.
While Rangarajan refused to share details of today's meet, he said the issue of interest rate did come up.
Coming out of the meeting, Indian Banks' Association (IBA) Chairman Alok K Misra told reporters it was a feedback Rangarajan took from the mutual funds industry, life insurance industry and the banking industry.
"We all shared it out. We said projects at this point of time are not coming, what should be done. Investors sentiment should be good and the cost should come down. Sanctions (to projects) should be made faster," Misra, who is also Chairman and Managing Director of Bank of India, added.
According to ICICI Bank Managing Director, Chanda Kochhar, the discussion points were mainly to do with the economy and measures required to boost growth.
"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," she said.
Amid industry complaining that high interest rate regime was hurting business activities, India's GDP growth in last quarter of 2011-12 fell to a nine-year low of 5.3%.
Also there have been concerns among foreign investors on the retrospective amendment to the Income Tax Act and the proposed General Anti-Avoidance Rules (GAAR).
Canara Bank Chairman and Managing Director S Raman, who also attended the meeting, said while improving investment climate was one of the major discussion point, Rangarajan took view of banking sector on the issues related to loan and deposit growth.
"What should be the direction of the interest rate. Of course the paramount conclusion was growth is important," Raman said.
Chairman of Association of Mutual Funds of India (AMFI) and MD of HDFC, Mutual Milind Barve, said various issues relating to the sector, including allowing pension product by the mutual fund companies, were discussed.
After taking charge of the finance ministry last month, the Prime Minister had stressed on the need to revive the mutual fund sector.
There are indications that SEBI is not in favour of
reintroducing entry load or commissions for mutual fund distributors.
It is, however, open to raising the expense ratio which is fixed at a peak 2.5% of the assets of the scheme currently.
The bankers have been making a pitch for cut in the Cash Reserve Ratio (CRR), a portion of deposits banks are required to park with the RBI. The CRR requirement is currently at 4.75% of total bank deposit.
This is aimed at lowering the cost of the fund and in turn lowering interest rate to spur consumption.
The Reserve Bank, which opted for status quo in its last policy in June, is scheduled to review the monetary policy on July 31.
While the short-term lending rate (repo) has been kept unchanged at 8%, the CRR stood at 4.75%.
Rangarajan, a former RBI Governor himself, had yesterday said the apex bank would find it difficult to cut interest rates in its monetary policy review later in the month in absence of softening of inflation.
During their meeting with Ranagarajan, the India Inc had pressed for revival package to boost the economy.