Industry body FICCI has urged the government to ensure that the benefits of the interest rate reduction by the RBI are transmitted to the consumers in terms of lower EMIs, and also to the borrowers. In a meeting convened by Finance Minister Nirmala Sitharaman with the industry leaders on the growth concerns, FICCI President, Sandip Somany said that the real interest rate is still high despite a cut of 110 basis points by the RBI since the start of the year.
The transmission is still less than 25 bps even after SBI's latest interest rate reduction. While there is a need to reduce the repo rate further, it is also necessary to encourage the banks to pass on the benefits of the rate reduction to the consumers and borrowers, he added. Though RBI has put liquidity in the surplus zone, banks are reluctant to lend, adding that the government must ensure that banks are encouraged to lend to the genuine borrowers.
For the NBFCs, Somany said RBI needs to get into an exercise of Asset Quality Review (AQR) speedily, in the same way as it has been done in the banking sector, and publish the results. Further, to buffer the downside in the automobile sector, the government should look at a temporary reduction in the GST rate to 18% till April 2020 to enable clearance of stocks before BS-VI regulations kick in, said Somany.
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