The Hindu Business Line : FICCI study sees hardening of rates

A hardening of interest rates may be on the anvil, according to the Federation of Indian Chamber of Commerce and Industry annual survey on the expectations of financial markets.

The annual survey on expectations of the monetary and credit policy to be announced on April 18 reveals that 82 per cent of the respondents - bankers, financial institutions and corporates - see a further hardening of interest rates and 79 per cent hope that the RBI would reduce the Cash Reserve Ratio by 50 basis points.

The FICCI survey results, based on feedback from 52 respondents, show that while 73 per cent of the respondents felt that RBI was right in increasing the repo and reverse repo rates last year due to increase in the inflation rate, only 27 per cent felt that it was a sort of anticipatory measure to avoid inflationary pressures. However, 60 per cent of the respondents shared the concern of the likely adverse impact of this hike on industrial growth, especially in the small and medium enterprises (SMEs) sector that will be charged higher lending rates.

Meanwhile, 86 per cent of the respondents expressed that the definition of priority sector lending should be expanded. Another 85 per cent of respondents suggested allocation of higher percentage of investment in infrastructure as priority sector lending. To give a further boost to lending to infrastructure sector, 57 per cent of respondents said that that risk weightage attached to the sector should be reduced from the existing level of 100 per cent to 50 per cent. Sixty-four per cent of the respondents believe that there should be separate non-performing norms for these segments.

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