RBI's moves in right direction: Kamath

New Delhi, Nov 16 (UNI) Welcoming the slew of measures announced by the Reserve Bank of India (India) yesterday to ease credit in the system, including enhancing forex liquidity, the industry today said the apex bank has moved in the right direction.

''We had suggested that the interest rate cap on Foreign Currency Non-Resident (Banks) and NRE deposits be removed and the banks be allowed to decide these rates. Therefore, the raising of the interest rates by 75 basis points (bps) respectively is very welcome. However, we feel that removal of the cap is what is called for at this juncture,'' CII President K V Kamath said here.

Addressing the India Economic Summit, jointly organised by the Geneva-based World Economic Forum and the CII, he said small industries were the worst hit owing to the credit squeeze in the system and the RBI has taken the right decision in extending Rs 2,000 crore to SIDBI and Rs 1,000 crore to NHB, which would also help the sagging real estate sector.

In addition, the reduction in risk weights for lending to real estate and provisioning requirements for standard advances would help ease the pressure that the sector was under owing to credit having dried up, Mr Kamath said.

Commenting on the RBI's move to provide some support to the exporting sector, he said raising the ECR limit from 15 per cent to 50 per cent was going to help exporters access finance from the banks and the Rs 22,000 crores of additional liquidity, that was expected to be injected for the exporting community, was necessary at this stage.

The extension of the period of entitlement of the first slab of pre-shipment rupee export credit from 180 to 270 days would also help, Mr Kamath said.

The CII President said the problem was one of sentiment overtaking events and therefore, the RBI's response to the emerging needs of industry sent out the right signals.

The India Economic Summit began on a note amid growing fears of recessionary trends. Nearly 700 participants from over 30 countries are articipating at the Summit.

UNI SBA/MP GL CS2355