ASSOCHAM urges RBI to begin halt in rate hikes; provide concessional loans to EVs

New Delhi: Ahead of the bi-monthly meeting of the RBI’s Monetary Policy Committee, the ASSOCHAM has impressed upon  the MPC to moderate interest rate hikes , in order to ensure that the rising cost of borrowing does not have an adverse and disproportionate impact on nascent economic recovery.

At most the new rate hike should not exceed the 25-35 basis points band, the ASSOCHAM said in its letter to the RBI Governor Shaktikanta Das, along with highlighting other issues before the industry. One of the key recommendations advanced by the ASSOCHAM to the RBI is to treat retail loans for purchase of Electric Vehicles (EVs) as priority sector lending, with a concessional rate of interest.

“Retail advances against Electric Vehicles may be included under Priority Sector Lending. This may help in catalysing the India EV story”, ASSOCHAM Secretary General Mr Deepak Sood said in a presentation to the RBI.

In a separate discussion, Mr Sood said, “while India has been marching well on the EV journey, the cost of acquiring an electric vehicle is on the higher side; thus needing a positive discrimination in the interest rates by the banks’’. He said the EV push is required from all sides, including banks.

As regards increasing cost of borrowing, the chamber said that the recovery in the Indian economy is quite noticeable, especially in the backdrop of the global head winds. However, it is still in the nascent stage and needs to be supported. ‘’Signs of inflation peaking are visible when it comes to the domestic economy. Even in the developed markets, early indications of inflation peaking are visible, thus setting a stage for the RBI-MPC to move towards halting the rate hike cycle,’’ Sood said.

In another suggestion, the chamber said RBI may consider a special window of borrowing for IREDA at repo rate (presently for AIFIs such as NHB, NABARD) to ensure availability of low-cost funds for renewable projects.

In a unique proposition, ASSOCHAM urged the central bank to consider a time bound approach for getting all banks under Account Aggregator (AA) framework. The framework helps an individual to access and share information from one financial institution to any other in the AA network securely and digitally. Other financial institutions, regulated by SEBI/ IRDAI may be encouraged to join the framework as information providers and information users.

ASSOCHAM also pressed for easing of norms for infrastructure lending and greater flow of funds for the non-banking finance companies.

To achieve priority sector targets, the Urban Cooperative Banks (UCBs) may be allowed to co-lend to NBFCs as well. ASSOCHAM further said, the tier-4 UCBs may be allowed to appoint Corporate Banking Correspondents to expand their reach. A separate category should be created for sustainable finance under “Infrastructure finance”.