Deutsche wants rate cut

Deutsche Bank India asked the Reserve Bank of India (RBI) on Monday to further cut reserve ratios as well as policy rates, and relax the overseas borrowing norms to infuse more liquidity into the system.

“We need more liquidity, more CRR cuts, repo rate and SLR cuts ... The RBI needs to go through the second phase of rate cuts,” Deutsche Bank MD and CEO Gunit Chadha said, while addressing a session on the infrastructure sector at the India Economic Summit.

Chadha also made a case for removing the interest cap on overseas borrowings to help infrastructure companies raise long-term funds, adding that credit ratings could be made mandatory for firms wanting to raise funds through external commercial borrowings (ECBs).

 

RBI has reduced the mandatory deposits that banks keep with it (CRR) and the amount they have to park in government securities (SLR) by 350 basis points and 100 basis points, respectively. The central bank has also reduced the short-term lending rate by 150 basis points, signalling a softer interest rate regime.

Chadha also underlined the need for setting up a sovereign wealth fund to facilitate investment in infrastructure, adding that such investment should be recognised as priority lending, like for exports and small-scale industries.

“Create a new window for external debt financiers to subscribe to oil bonds, fertiliser bonds, infrastructure bonds because as and when the market will open up you want to have as much external financing as possible...,” he said.