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Commerce Minister urges for 2% interest rate cut by RBI

( 14:00, 25-Aug-16)

In order to ease the cost of credit for the micro, small and medium enterprises (MSME) sector, Commerce and Industry Minister Nirmala Sitharaman has urged Reserve Bank of India (RBI) to cut interest rate by as much as 200 basis points (bps) or 2%. Though, she did not specify if it would be at one go or over a period of time.

The Sitharaman said that the cost of credit in India is high. Particularly MSMEs, which create a lot of jobs and contribute to exports, are all hard pressed for money and for them, approaching a bank is no solution because of the prevailing rate of interest. Therefore, she would take up the matter with the Finance Minister about directing banks to pass on benefits of the rate cuts to the industry. She added that every sector approaching the commerce ministry was all for access to affordable credit. 

Minister further said that the interest subvention scheme announced for exporters has been helpful in dealing with the impact of global demand slowdown. After rising for the first time in 18 months in June, exports shrank again in July, contracting 6.84 per cent, due to decline in shipments of engineering goods and petroleum products. She added that the e-commerce policy was being looked at to address any discrepancies. Besides, an online grievance redressal mechanism on complaints against e-tailers will be created under Department of Industrial Policy and Promotion (DIPP) with representation from the Ministry of Consumer Affairs.

Repo rate is the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds. The repo rate now stands at 6.5% since April this year citing inflationary concerns, is scheduled to hold its next policy review on October 4 and it will be presented by Urjit Patel, who will take charge as governor on September 4.

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