Industry groups meet Shaktikanta Das, seek 50-bps cut in repo rate, CRR

Industry bodies want RBI to have a relook at its Feb 12 circular on the restructuring of stressed loans

To get low-cost money in times of tight liquidity and to boost growth, industry bodies in their meeting with RBI Governor Shaktikanta Das sought a 50-basis-point cut in the repo rate and cash reserve ratio.
 
This demand comes ahead of the next policy meet slated next month given that consumer price inflation (CPI) has remained consistently low. The CPI reading for the month of December 2018 was 2.19 per cent. 
 
At present, the repo rate stands at 6.5 per cent and the cash reserve ratio (CRR) at 4 per cent. CRR, which is carved out of banks' deposits, is kept with RBI and does not earn interest. 
 
The next monetary policy meet is scheduled for February 7.
 
"The need of the hour is to have an accommodative monetary policy, focusing on growth. The objectives of the Monetary Policy Committee should not be restricted to only price stability but also to consider growth and exchange rate stability," said Sandip Somany, president, FICCI.
 
They have also demanded that the RBI should revisit the lending restrictions imposed on banks under the Prompt Corrective Action (PCA) and they should be allowed to lend to the National Housing Bank, which will prove beneficial for housing finance companies (HFCs) that finance housing projects.
 
At present, 11 out of 21 public sector banks are under the PCA.
 
Moreover, the industry bodies wanted the RBI to have a relook at its February 12 circular (on restructuring of stressed loans). The circular requires banks to put borrowers under the category of defaulters, even if the account delays repayment by a day.
 
"The circular was aimed at improving the credit discipline and early identification of probable defaults. However, it put pressure on already distressed sectors, impacted for business performance reasons, and hence, should be given sufficient time to resolve the defaults," CII said in its statement after meeting with the RBI Governor.

 
Further, they have asked for a separate classification of large non-banking financial companies (NBFCs) with a good track record to be placed under "Exceptionally Large NBFCs (ELNBFCs)", so that they can avail of the facility of liquidity window, which is available only to banks. They also requested that they should get access to the Aadhaar database as they significantly drive financial inclusion in the retail and SME segments. 
 
Considering the liquidity crisis that NBFCs have faced after Infrastructure Leasing & Financial Services (IL&FS) defaulted on its debt payments, the industry has asked the central bank governor to provide backstop facility to HFCs through the National Housing Bank (NHB). Moreover, they have suggested that this facility can also be extended to the strategically important NBFCs, along with providing refinance facility for mutual funds.

 
On the regulation side of the NBFCs, CII has suggested that there needs to be an enhanced supervision of systemically important NBFCs, which have an asset size of more than Rs 500 crore. This can be done by instituting a wide risk management system, the guidelines for which will be created by the RBI.

Industry wish list

| Re-look at the lending constraints of the PSBs under PCA

| Re-look at the February 12 circular (on restructuring of stressed loans)

| A separate classification of large NBFCs as “Exceptionally Large NBFCs"

| Backstop facility to HFCs through the National Housing Bank

| Enhanced supervision of systemically important NBFCs