KOLKATA: Banks have not been passing on the lower cost of funds to borrowers even as the industry and exporters continue to bear the brunt, EEPC India Chairman Ravi Sehgal said today.
He hailed the RBI move to cut the interest rate by 25 basis points in its first policy review of 2019-20."Despite a 50 basis point reduction in the repo rate since February, the banks have not been passing on the lower cost of funds to the borrowers even as the industry and the exporters continue to bear the brunt of expensive funds," he said.
The muted credit growth in exports and MSME space is a clear reflection of the high cost of money, he added.
"RBI Governor Shaktikanta Das has himself flagged the issue of marginal transmission of rate cuts by the banks.
If the RBI cannot enforce the transmission, who can" he asked.He termed the situation as ironical in which the central bank flags the concerns on the global economic slowdown and its major impact on Indian exports whereas banks continue to charge prohibitive rates of interest.
"The high cost of borrowing is making our exports uncompetitive.
The Monetary Policy Committee of the RBI itself has noted with concern how exports showed a subdued performance in January and February in 2018-19," Sehgal said.
He further said that be it the US or Euro zone or the UK, there are clear signs of slowdown in India's major export markets.
Under the given circumstances, the RBI should exercise its powers and clout in full force and ensure proper transmission of the rates by the banks, he suggested.