AIAI feels RBI should have reduced the interest rate to support MSMEs and
further support infrastructure funding with long term bonds
Mumbai, April 6, 2017: The RBI’s Monetary Policy Committee today kept the repo rate unchanged and hiked the reverse repo rate by 25 basis points. The unchanged repo rate was on much expected lines. However AIAI feels that RBI should have reduced the rate to boost economic growth that is showing strong signs of revival.
Mr. Vijay Kalantri, President, All India Association of Industries said, “In Our view, RBI should have reduced the repo rate to provide boost to economic growth. While RBI acknowledged that there is a room for further rate cut in last meeting, banks should reduce the interest rates by at least 2% to provide impetus to MSMEs.”
Since January 2015, RBI had cut the repo rate cumulatively by 175 basis points. However, as per RBI, the banks’ weighted average lending rate had come down by only about 80-95 basis points, at the most. Rising NPAs and Bad Loans are putting pressure on the economy.
Mr. Kalantri added, “RBI must make efforts to promote long term funding for infrastructure sector including power, road and ports. These sectors are relinquishing under the policy delays and recessionary trends. Globally Bonds have been proved as a practical and most effective fund raising option for the infrastructure sector. To sustain the economic growth, RBI and Government should promote long term infrastructure bonds.”