Cii Urges 7% Crr In Slack Season Policy

The Confederation of Indian Industry has recommended reducing the cash reserve ratio (CRR) to 7 per cent from the present 10 per cent to enhance the flow of funds to the corporate sector. This should be brought down by a further 3 per cent by 1999-2000, it says.

The chamber has recommended a liberal credit policy and lower interest rates. According to the CII, while the credit policy should strive towards managing inflation, enhancing credit flow and maintaining exchange rate stability, a balance needs to be achieved in the interests of the economy.

The CII wants the credit policy to aid in achieving the overall growth rate of 7-8 per cent and industrial growth of 10-12 per cent. It should address issues like availability of funds, lowering the cost of credit, priority sector lending, development of the commercial paper market, development of NBFCs and bank autonomy.

 

The chamber says funds should be made available to the corporate sector at competitive rates for productive purposes. Further, bank officials should be allowed to take decisions based on commercial principles. It wants a prime lending rate (PLR) of 13 er cent.

It says there is a need to reduce the spread between the interest rates and inflation rate to around 2-3 per cent.

The CII has also suggested that the RBI should reconsider its recent guidelines on NBFCs and ask commercial banks to ease the flow of credit to them. Banks currently charge NBFCs an interest rate of 4-5 per cent over the PLR, which raises the cost of capital.