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Domestic Credit Flow Still Tight Says FICCI
(13:01, 06 Dec 2018)

FICCI noted in a latest update that the recent measures taken by RBI have improved the liquidity situation, but credit flow is still tight. While easing liquidity further will definitely help credit, more complementary steps are required to improve credit delivery. There is an urgent need to improve the credit flow to the real economy. GDP growth is already showing signs of slowing down. With crude oil prices down, we need to take further measures for the revival of animal spirits in the economy and give more momentum to it, stated Rashesh Shah, President, FICCI.

Credit availability will certainly give more confidence. RBI should cut CRR and interest rate, and release more liquidity, along with other supporting measures like reduction in the risk weightage for MSME and affordable housing loans to enhance credit flow, he added. FICCI's assessment shows that the flow of funds to the industry, especially MSMEs, construction, real estate and the housing sector, has been adversely affected by the cost of credit going up. The borrowing rates for companies through instruments such as short-term commercial paper also continue to remain high.

In the latest Business Confidence Survey of FICCI, the proportion of respondents citing the cost of credit and availability of credit as a major constraining factor has gone up to 60% and 48% respectively. This represents a significant jump over 41% and 24% of the respondents who had reported likewise in the previous survey.

Given this backdrop, there is a need for immediate steps to ensure that the flow of credit is not curtailed to productive sectors of the economy, especially the MSME and housing, which are also key generators of employment. Adoption of measures, including a cut in the repo rate, lowering of CRR and modulation of risk weightage for MSME and affordable housing loans will help in improving the credit flow to these sectors.

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