rbi: India Inc expects another 35-50 basis point hike in policy rates by RBI

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India Inc is bracing for a further hike in policy rates by the RBI’s Monetary Policy Committee in the range of 35 to 50 basis points as the move seems inevitable following global monetary tightening aimed at limiting the impact of inflation, ASSOCHAM said. The chamber sought a balanced and smooth transition to the new trajectory for borrowing costs.

Seeking several measures to ensure that adequate liquidity is maintained within the system, ASSOCHAM said that a “35-50 basis point rate hike appears imminent and inevitable while the MPC may leave CRR rates and SLR unchanged”.

ASSOCHAM Chairman Mr. Sumant Sinha said a 35-50 basis point hike in benchmark rates seems inevitable at this time given continued monetary tightening by the US Federal Reserve and other central banks. He noted, however, that economic activity is at robust levels. “India is in an ideal situation with growth coming from all directions and inflation relatively contained. Lower crude prices will bode well for the economy and we should start the cycle of lower interest rates. from the start of fiscal year 24.”

Among other suggestions, he said sustainability should be placed as part of priority sector lending and only then will tax-exempt bond issues and reduction in capital charge and provisioning lead to lower cost. borrowing for sustainable projects and will do the same.

Chamber Chief Secretary Mr Deepak Sood said: ‘While the industry would like to see lower interest rates, the main challenge and priority is to tackle inflation head-on in order to that we have sustainable growth. He said that the intention of monetary intervention by the RBI should not lead to deflation in the economy and that fiscal reminders could prove beneficial in controlling inflation.

The chamber, which sent a detailed note to the RBI, ahead of the upcoming credit policy review, said India is better positioned on the inflation front than advanced economies, which are experiencing inflation higher due to supply issues on labor and energy shortages, especially in Europe.

Indian lending rates need to remain somewhat in line with the global trend to ensure that the impact of frequent rate reviews by the US Federal Reserve and several other central banks is minimized in terms of emerging market outflows. The stability of our forex market is another “request” before the RBI. Pressure on the rupee against the USD would be inflationary, according to the chamber note, appreciating the RBI for finding a good balance in exchange rates.

On the details, the chamber suggested the continuation of NPA classification standards after the outbreak of the Corona pandemic, for MSMEs. He said MSMEs that were classified as NPA due to the pre-pandemic downturn, continue to face the challenges of post-pandemic disruptions. “Therefore, we suggest a one-time relaxation of the Income Recognition and Asset Classification (IRAC) standards to MSME units that have been classified as NPA but continue to operate.”

In order to encourage the participation of individuals in State securities, ASSOCHAM has offered tax incentives in various forms, including for the elderly and others.

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