RBI needs to work consultation with industry to ensure sufficient liquidity in system: CII study

The RBI needs to work in consultation with industry to ensure that there is sufficient liquidity in the system so that consumer sentiments are not impacted in the ongoing festive season, a CII-Ascon study suggested Thursday.

It said that dwindling liquidity should not affect festival demand across key sectors.

Consumer sentiments should not get impacted by the current condition, especially when it comes to offtake of passenger vehicles, household goods and ancillary sectors, it said.

The participants of the study were office bearers of industry associations from across sectors such as automobiles, electrical equipment, power, SMEs, and infrastructure.

"The RBI needs to work in consultation with all segments of industry to ensure that there is sufficient liquidity in the system. The current situation of tight liquidity is of concern from consumption and investments point of view," it said.

It added that with capacity utilization going up to 80 per cent, this is the right time for higher investments.

"However, this is constrained due to liquidity considerations and higher cost of credit, the release added. In the auto sector, representatives pointed out that poor market sentiments are impacting sales along with issues such as rising petrol prices," the study said.

Further it said that the cautious approach of non-banking financial companies regarding new lending is due to their lack of liquidity.

"SME sector in particular is impacted by the additional requirement for collateral and higher cost of credit which is leading to tighter funding. Working capital is under pressure and cash flow is getting affected," it said.