The Indian industry has urged the Reserve Bank of India to cut key policy rates to push lending by banks to it.

Ahead of the Reserve Bank of India's (RBI) monetary policy review early in February, industry body FICCI urged the RBI to consider cutting the repo rate and CRR to enable lowering of lending rates by banks. 

A FICCI delegation led by Sandip Somany, President, FICCI, congratulated RBI Governor, Shaktikanta Dasfor calling the meeting of the industry chambers to discuss the current economic scenario.

Somany said that reduction in the repo rate and CRR would help in reviving the investment cycle in the country and will also boost consumption and support growth.

"The need of the hour is to have an accommodative monetary policy, focusing on growth. The objectives of the Monetary Policy committee should not be restricted to only price stability but also to consider growth and exchange rate stability," he added.

Some of the other important issues discussed at the meeting included NBFC's liquidity concerns, measures required to streamline and boost MSME financing and steps needed to push export-led growth.

The Confederation of Indian Industry (CII) suggested a cut in the RBI-mandated CRR for banks by at least 50 basis points (bps) to facilitate flow of credit to industry, especially to MSMEs, and steps to reduce the high cost of credit, like a reduction of 50 bps in the repo or RBI's short-term lending rate for commercial banks.

The chamber pointed out in this regard that that the inflation rate has been consistently low over a number of months.

"On measures to address the financial challenges faced by the MSMEs, CII suggested that RBI consider limiting the collaterals sought by banks to 133 per cent of the exposure and eliminate the need for personal guarantees where sufficient collateral exists," a statement said.

The recent appointment of Das, who had retired earlier as Economic Affairs Secretary, was preceded by the abrupt resignation of Urjit Patel as the RBI Governor, following a period of tension between the government and the central bank.

The government's differences with the RBI centred on four issues - the former wanted liquidity support to head off any credit freeze risk, a relaxation in capital
requirements for lenders, relaxing the prompt corrective action (PCA) rules for banks struggling with accumulated non-performing assets (NPAs) or bad loans, and support for MSMEs.

The industry chamber Assocham delegation told the RBI Governor that in order to ensure a steady growth rate of 7.5 per cent, the economy needs credit loosening so that liquidity can sustain the growth.

"The fund raising capability of NBFCs/HFCs (housing finance companies) has reduced significantly, warranting support from the government. They need to be provided alternate options for raising funds. This is imperative not just for the health of NBFCs/HFCs but for sustaining the GDP growth rate as well," Assocham said.

Assocham brought to the Governor's notice that sectors like textile, handicraft and leather goods need to be given interest subvention to boost their export capabilities and rate of interest subvention should be increased from three to five per cent, the statement added.