SME Times News Bureau | 05 Dec, 2018
The recent measures taken by RBI have
improved the liquidity situation, but credit flow is still tight; while easing
liquidity further will definitely help credit, more complementary steps are
required to improve credit delivery, said industry body FICCI.
"There is an urgent need to improve
the credit flow to the real economy. GDP growth is already showing signs of
slowing down. With crude oil prices down, we need to take further measures for
the revival of animal spirits in the economy and give more momentum to
it," said Rashesh Shah,
"Credit availability will certainly
give more confidence. RBI should cut CRR and interest rate, and release more
liquidity, along with other supporting measures like reduction in the risk
weightage for MSME and affordable housing loans to enhance credit
flow," he added.
FICCI's assessment shows that the flow of
funds to the industry, especially MSMEs, construction, real estate and the
housing sector, has been adversely affected by the cost of credit going up.
The borrowing rates for companies through instruments such as short-term
commercial paper also continue to remain high.
In the latest Business Confidence Survey of FICCI,
the proportion of respondents citing the cost of credit and availability of
credit as a major constraining factor has gone up to 60 per cent and 48 per
This represents a significant jump over
41 per cent and 24 per cent of the respondents who had reported likewise in the
Given this backdrop, there is a need for
immediate steps to ensure that the flow of credit is not curtailed to
productive sectors of the economy, especially the MSME and housing, which are
also key generators of employment.
Adoption of measures, including a cut in
the repo rate, lowering of CRR and modulation of risk weightage for MSME and
affordable housing loans will help in improving the credit flow to these sectors.
Additionally, the RBI could facilitate
large scale securitisation of NBFC assets so that the NBFC sector can continue
to meaningfully complement the banks as a source of long-term funds.
Further, withholding tax on ECBs can also be done away with as has been done
for Masala Bonds as this would also support the flow of funds in the economy,