FICCI pitches for further cut in interest rate, better transmission, at the meeting with Finance Minister

Aug 08, 2019

Rate transmission by banks to consumers and borrowers a big issue: Sandip Somany, President, FICCI

 

NEW DELHI, 08 August 2019: 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 Ms Nirmala Sitharaman with the industry leaders on the growth concerns today, FICCI President, Mr 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," added Mr Somany.

On the liquidity front, Mr Somany said, 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.

And in the case of the NBFCs, Mr 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. "This should help the market differentiate the good from the bad - and thus the good ones can once again access resources for lending at a relatively lower rate than it is doing currently."

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 Mr Somany.

For the textile sector, though the call will have to be taken by the GST Council, FICCI President requested for a GST rate of 12% across the value chain.

Mr Somany also pointed out that the existence of numerous Rules & Regulations for the industry is still making the compliance a burdensome task and the government must consider easing this further.

To deal with the post NCLT difficulties associated with multiple litigations in various jurisdictions, Mr Somany suggested that the IBC should be amended for the following: -

• Jurisdiction of all claims, criminal proceedings, departmental proceedings etc. should be the NCLT passing the order. After the date of NCLT order, all litigants should be made to file their cases only with that NCLT.
• The courts other than NCLT, NCLTA and Supreme Court should be empowered to summarily dismiss the case even without admitting any litigations pertaining to the Unit arising on a date prior to the NCLT order date.