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\"Core inflation must be reduced to 1%\"
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indian news portal IBNS
indian news portal IBNS

"Core inflation must be reduced to 1%"

India Blooms News Service

New Delhi, Nov 21 (IBNS) The Reserve Bank of India (RBI) will be extremely cautious in reducing the interest rates so that they should not result in collapse of the financial sector, said K.C. Chakrabarty, Deputy Governor of RBI.

He was addressing the summit organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) here in New Delhi.

Chakrabarty stressed for need to create capacity building, adding, lower interest rates are not going to help the growth of the country.

He also said that banks can bring down the NPAs and reduce the interest rates.

While addressing the ASSOCHAM conference on 8th Annual Banking Summit, Chakrabarty said the manufacturing sector plays a major role.

He said they have to produce goods of world quality at competitive prices.

The corporates have failed to create global brands as there has been lack of technology absorption in almost all important segments of the economy, he said.

“Any infrastructure built needs to be adequately priced so as to recover the cost. Money is not the main problem; the real problem is the utilisation and maintenance of infrastructure,” said Chakrabarty.

He said the 2G- growth with governance has assumed an importance due to the moderating growth.

He urged upon all stakeholders that they must improve governance at all levels. "Country is passing through a most critical time and therefore maintains austerity at all levels like government, private and individuals."

"If society needs to survive, we must go by 8% to 10% growth by next 20 years. Core inflation must be reduced to 1% which will reduce down the cost of borrowings and expand the manufacturing sector," he said.

“Agriculture is contributing only 15% of the GDP employing 70% people. Banks must help SMEs and also agriculture sector be mechanised. So that larger resources are available for the commercial purposes,” said Chakrabarty.

"Banks must reduce the credit rates for SMEs, Agricultural and retail." He also added that banks in India have not taken adequate risk and this is must for the survival of the banks to become healthy, citing the need for Basel III capital requirements.

ASSOCHAM and Yes bank jointly released a special publication on “Banking India’s growth story” disclosed that the regulator could incentivised banks by lowering reserves requirements (CRR and SLR) for rural and semi-urban branch deposits, so as to increase average population coverage by a commercial bank branch”.

M. Narendra, Chairperson ASSOCHAM National Council for banking and finance and CMD of Indian Overseas Bank highlighted the importance of the financial inclusion by mentioning that an inclusive financial system facilitates efficient allocation of productive resources and thus can potentially reduce the cost of capital.

He said that the concept of servicing at branches is changing completely with application of IT and banks have to view themselves not just as providers of credit but as partners in the growth of MSMEs through a process of handholding of first generation entrepreneur, while they find their feet in the business.

Rajkumar Dhoot, MP and President ASSOCHAM said that banks need to balance business objective between stakeholder’s expectations and risk management.

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indian news portal IBNS
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indian news portal IBNS
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