Crr Cut To Prop Sluggish Economy: Gcci

The Gujarat Chamber of Commerce & Industry (GCCI) has welcomed the credit policy announced by the Reserve Bank of India and said the reduction in bank rate by 0.5 per cent and the CRR by 2 per cent would enable the banking sector to release funds of Rs 6000-Rs 8000 crore to the recession hit industry. This in turn would enhance the pace of investments and provide the right push to the sluggish economy.

GCCI president Kalyan J Shah emphasised that the operational flexibility provided to banks to change the composition of working capital facilities by increasing the cash credit component would help in bringing down the borrowing cost.

 

He, however, felt that it would have been more appropriate if the one-time settlement of NPA scheme had been extended by at least one more year since the public sector banks had already recovered a total sum of Rs 2,192 crore till July 31, 2001. The extension of the scheme would have helped the banks to reduce their NPAs further, he added.

Shah stated that when the urban co-operative banks were not registering healthy performance, the regulatory steps being taken by RBI like offsite monitoring system would help the small depositors retain their confidence in the co-operative banking sector.

Moreover, the initiation of transparency in the non-SLR investments by banks and financial institutions would help in prudent management of funds in the financial sector, he maintained.

"The initiation of the negotiated delivery system and starting of the Clearing Corporation of India are other welcome steps as they are basic prerequisites for switching over to a pure inter-bank call money market," he elaborated.

However, Shah felt that when exports are shrinking due to global economic slowdown as also the Afghan war, a dynamic package of financial incentives in the form of cut in interest rate on export credit should have been given. Moreover bank charges should have been made reasonable and uniform and banks should have been directed to extend pre-shipment and post-shipment facilities to exporters without the latter having to face any cumbersome procedures.

Shah also said that it was unfortunate that the policy has not given any kind of financial incentives to the SSI sector, despite the hardships being faced by the latter in the face of the impending WTO regime.