Softer interest rates to spur credit growth

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New Delhi, Oct 7 (UNI) With the hardening of interest rates over the last one and a half years and appreciation of the rupee squeezing the profit margins of a range of manufacturing industries and directly affecting 91 per cent of exporting companies, Ficci has urged the RBI to unveil a softer interest rate regime to spur credit growth.

For its feedback to the RBI for the upcoming Annual Policy statement, Ficci conducted a quick review of the credit needs of some important sectors where credit need is significant and requires special attention of the regulator.

The Ficci survey points to the need for 'direct agriculture' lending for investments in agri-marketing infrastructure by corporates in sectors such as construction of warehouses and cold chain transportation without any upper ceiling.

This would make more funds available for activities that build the agricultural value chain since banks have a large corpus of funds available to lend under the 'direct finance' category of priority sector lending, said Ficci.

The survey recommends that the 'direct finance' category for agriculture should be expanded to include investments in infrastructure for the entire agri-value chain, investment in agricultural research in frontier areas like biotechnology and development of high yielding varieties and investment in extension services to promote best agri-practices, and purchase of high yielding milk cattle.

Further, the Ficci survey suggests that bank finance for all investments should also be included as part of 'Indirect Finance' category under priority sector guidelines. ''This should including extension services provided by the private sector to the farmer, setting up of biofuel extraction facilities, research on development of alternate feedstocks and establishing large biofuel plantations, micro irrigation, e-governance and digitization,'' said the chamber.

Apart from expanding investments under direct and indirect categories of priority lending, the RBI should allow access to RIDF funds to private parties for agriculture marketing and infrastructure projects, said Ficci.

Also, there is a need to establish a Credit Bureau with unique customer ID with credit history and establish a centralized data information center that would act as back-end support for risk management of credit, the survey said.

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