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Industry urges RBI for rate cut before Apr meet
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SME Times News Bureau | 16 Mar, 2020
Industry body CII has urged the Reserve Bank of India (RBI) to announce
an emergency rate cut of at least 50 basis points (bps) before the
scheduled bi-monthly meeting of its Monetary Policy Committee (MPC) in
April.
In a statement, CII said while the Reserve Bank of India
(RBI) has its scheduled monetary policy meeting coming up in April, it
could deliver growth supportive measures even earlier.
The
industry body's statement comes as the RBI fell short of announcing a
rate cut on Monday and instead declared its decision to conduct
dollar-rupee sell buy swaps and more long term repo operations (LTROs)
worth Rs 1 lakh crore.
The apex bank in its last MPC meet in February kept the repo rate unchanged at 5.15 per cent in view of the uptick in inflation.
Chandrajit
Banerjee, Director General, Confederation of Indian Industry said: "We
were buoyed by the bouquet of innovative measures introduced by RBI in
its last monetary policy. The need of the hour is to continue with more
such innovative steps apart from announcing a rate cut by at least 50
basis points."
The chamber noted that the outbreak of coronavirus
has endangered the expectations of a global recovery in 2020, emerging
as the biggest global concern by crippling China and significantly
impacting global supply chains.
Global policymakers are trying to
support financial markets and the real economy through coordinated
policy actions, it said, adding that it is time that the domestic
policymakers also join in orchestrating the coordinated policy response.
This assumes importance, given the fact that COVID-19 is likely to
exacerbate the specter of slower growth domestically as clampdowns are
increasing both within and outside India, which would curtail consumer
mobility and lead to deferral of spending, said the CII statement.
The
RBI should not hesitate to cut rates by even a larger proportion, in
line with global central banks, Banerjee said. The US Federal Reserve
has already lowered interest rates to near zero as coronavirus has
spread rapidly.
On the anticipation that the RBI would announce a
"much-needed" rate cut, Das told reporters that only the Monetary
Policy Committee can cut rates, however, nothing can be ruled out the
RBI is ready to take action as and when necessary.
It noted that
while a further increase in quantum of liquidity support to be provided
under the Long-Term Repo Operations (LTROs) is welcome, additional
targeted liquidity support to sectors such as MSMEs is need of the hour,
where problems have exacerbated due to the disruptions in global supply
chains.
"RBI could take a leaf out the recent measures announced
by the European Central Bank (ECB) Aby launching a new round of
targeted longer-term refinancing operations (TLTROs) to support bank
lending to those affected most by the spread of the coronavirus, in
particular small and medium-sized enterprises," said the CII DG.
In
addition to providing support to various sectors and economy in
general, the RBI also needs to take definitive steps to prevent the
build-up of stress in the banking sector. The recent fiasco at Yes Bank
has exposed the chinks in the armour of the banking sector once again,
Banerjee said.
He also said that the role of RBI as the central bank and supervisor and monitoring authority of banks needs to be reconsidered.
"While
the RBI as the central bank keeps check on monetary policy, currency,
forex etc, a separate unit may be created under the aegis of RBI which
will be completely responsible for oversight, monitoring and supervision
of banks (both private sector and PSBs). This will ensure efficacy in
the performance of the distinct roles of RBI as the central bank of the
country as well as the regulator of the banks in India", added Banerjee.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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