Industry body Assocham has suggested lowering the interest rates of loans availed by the labour intensive infrastructure and agriculture sectors to push the economy reeling under the impact of global financial meltdown.
“A little more economic expansion and job creation will be possible even at times of meltdown if...PLR for agriculture and infrastructure projects (is brought down) at 10 per cent from about the current 15 per cent,” it said. Cut in PLR would lead to higher lending at reduced interest rates and hence more investments, it said.
“This will automatically generate economic expansion in terms of capacity enhancement and creation of jobs and push up demand,” Assocham President Sajjan Jindal said.
Demanding loan at less than 7 per cent for the agriculture sector, he said the sector is being neglected by the banks and financial institutions for credit extension at affordable rate of interest.
Further, referring to inflation at the historic low of 0.44 per cent, Assocham said the Reserve Bank of India should further lower the key policy rates — cash reserve ratio (CRR), repo rate (RR) and reverse repo rate (RRR).
“Since inflation has now fallen to 0.44 per cent...It can be advantageous to Indian economy provided 50 basis points reduction is further affected in CRR, RR and RRR,” it said.
The chamber said the banking and financial institutions have surplus liquidity but most of them are not extending credit to the mid-sized firms fearing default.
