New Delhi, Oct 12 (UNI) With a view to improving the situation emanating out of poor liquidity situation and low sentiments of the Indian economy, Confederation of Indian Industry (CII) has recommended the government to set up a corpus to lend money to small and medium enterprises (SMEs) being hit by the non-availability of credit.
The Central Bank and the Ministry of Finance may set up a Special Purpose Vehicle (SPV), also contributed by the banks, to ensure that the SMEs are allowed credit close to prime lending rates (PLR) on the credit worthiness of the unit and the project.
''...SMEs will be disproportionately hurt by the non-availability of credit. The RBI could immediately look to reduce the risk weight for lending to the SMEs,'' CII said in a statement. The industry body also asked the government to allow oil marketing companies (OMCs) to get dollars directly from the Reserve Bank of India against oil bonds that will be issued to them.
''This amounts to monetising the oil bonds. This would ensure that the forex reserves held by the RBI are put to good use even while the rupee is protected from coming under pressure owing to the need for dollars,'' the Chamber said.
The RBI has taken this step earlier and in the present situation it makes sense as oil companies are finding it difficult to source dollars from the market, it said.
The Chamber also suggested the RBI to unsterilise interventions in the forex markets in order to ensure greater availability of dollars in the system, which would add to the liquidity.
Also, it said there is need to provide for specific liquidity lines to banks and the NBFCs that are currently not getting liquidity under liquidity adjustment facility (LAF) due to lack of government securities. ''This would pre-empt any possibility of bank failures that we have seen in the US,'' the CII said.
Besides, it also suggested the removal of the cap on the NRE and FCNR(B) deposits, further reduction in repo rate, easing foreign direct investment norms to improve the liquidity in the market and bailout Indian industry from the ongoing credit crunch.
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