SME Times News Bureau | 19 Jan, 2019
Industry body Confederation of Industry (CII) has
urged the RBI to cut in CRR rate of at least 50 basis points and take measures
to facilitate flow of credit to industry especially to MSMEs.
In an interaction with RBI governor Shaktikanta Das
also said the liquidity concerns need to be addressed also to help the Infrastructure
sector and address the high cost of credit by considering reduction in repo
rate of 50 basis points given that inflation has been consistently low.
CII lauded the RBI for steps taken to ease
financing challenges faced by the real sector, especially the MSMEs through
various measures such as reducing Turn Around Time (TAT) and measures to boost
liquidity in the economy.
The various in-house surveys conducted by CII
recently revealed positive outlook on both top line as well as bottom line
fronts but were cautious on industry performance due to factors like liquidity
crunch, delayed payments and suppressed consumer demand, CII said.
On measures to address the financial challenges
faced by the MSMEs, CII suggested that RBI consider limiting the collaterals
sought by banks to 133% of the exposure and eliminate the need for personal
guarantees where sufficient collateral exists.
CII also suggested that Letter of Undertaking
(LoUs) for Buyers’ Credit for such cases where the MSMEs investing in expanding
capacity may be permitted and RBI may consider allowing banks to sanction
Buyers Credit facility to MSMEs, wherever import of raw materials is being done
under Letter of Credit.
On liquidity challenges faced by NBFCs, CII
highlighted the need to provide backstop facility to Housing Finance Companies
(HFCs) through the National Housing Bank (NHB) and may extend the same facility
directly to the systemically important deposit taking NBFCs (NBFCs-D) along
with providing refinance facility for Mutual Funds to address the liquidity
CII further suggested to RBI that considering the
important role played by extremely large NBFCs with impressive track record,
there is a strong case for a separate classification of these NBFCs as
“Exceptionally Large NBFCs (ELNBFCs)” to facilitate availability of liquidity
window facilities akin to Banks and providing full access to the Aadhaar
database as they significantly drive financial inclusion in the retail and SME
To address funding issues in the infrastructure
sector, CII said that there is a need for suitable intervention such as
implementation of Debt resolution plan and Inter Creditor Agreement (ICA) on an
urgent basis and also enhance opportunities for refinancing, takeout finance
and credit enhancement by expanding capital base and operations of IIFCL and
On February 12 Circular of RBI, CII highlighted
that while the circular was aimed at improving the credit discipline and early
identification of probable defaults, the circular has however put
pressure on already distressed sectors impacted due to business performance
reasons and hence should be given sufficient time to resolve the defaults.
Amongst many key recommendations, CII has
recommended that RBI may revisit the lending restrictions of PCA banks and
consider allowing them to lend to National Housing Bank which in turn can be
used to finance housing projects through HFCs (Housing Finance Companies).
CII also suggested enhanced supervision of
Systemically Important NBFCs (with asset size > Rs 500 crores) through
institution of enterprise wide risk management system and proposed to RBI to
consider formulation of guidelines for compliance and regular supervision.