Economy
RBI's monetary tightening policy affecting growth: FICCI

“The RBI policy of monetary tightening is inhibiting fresh investments and hurting growth. The government and RBI need to take steps to bring down the interest rates,” Federation of Indian Chambers of Commerce and Industry (FICCI) President R V Kanoria said

 
Guwahati: Trade body FICCI today said RBI’s (Reserve Bank of India) current monetary tightening policy was hurting country's growth and sought reduction of interest rates, reports PTI.
 
“The RBI policy of monetary tightening is inhibiting fresh investments and hurting growth. The government and RBI need to take steps to bring down the interest rates,” Federation of Indian Chambers of Commerce and Industry (FICCI) president RV Kanoria said.
 
Stating that Indian economy has potential to grow at double-digit, he said: “So why settle for an annual growth of 6%-6.5%. Inflation is related more to supply side bottlenecks.”
 
Mr Kanoria was speaking on the sidelines of a seminar here.
 
He also called upon all state governments to rally around the Centre for earliest possible implementation of the Goods and Services Tax (GST).
 
The FICCI president said government should curtail its spending and reduce fiscal deficit, while prescribing targeted subsidies.
 
“There is a need to revisit the subsidies. Subsidies should be targeted and reduced so that only those deserving them are able to avail of the benefits. The subsidy in diesel is going to people who can very well afford to pay for it,” he said.
 
He called for a formulating a land acquisition law which will take care of the people’s food security while allowing industry and services to acquire lands.
 
Regarding the depreciation in rupee, Mr Kanoria said RBI should concentrate on stabilising the rupee and arresting the volatility of the national currency.
 
In reply to a question on relations with Myanmar, Mr Kanoria said close ties with the neighbouring country would give a boost to the economies of the north eastern states.
 

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Coal India to import fuel for state-owned power firms

The ministry, in consultation with the Central Electricity Authority (CEA) has prepared a list of power plants for which Coal India Ltd (CIL) should import fuel during the current and the next financial year.  

 
New Delhi: The power ministry wants Coal India (CIL) to import coal only for the public sector power generation companies such as NTPC and state utilities, reports PTI.
 
The ministry, in consultation with the Central Electricity Authority (CEA) has prepared a list of power plants for which CIL should import fuel during the current and the next financial year.
 
“Only state utilities and public sector generating companies find place in the list,” a power ministry official said.
 
He said earlier the list included one thermal power project in the private sector. “Now even that has been replaced by NTPC,” he said.
 
Earlier this month, CIL board agreed to supply a minimum of 80% of the contracted quantity of the fuel to power firms, meeting 15% requirement through imports.
 
This decision followed a direction from the PMO (Prime Minister's Office) to CIL to sign the pacts with power firms for supply of 65%-80% of the contracted quantity, amid delays in signing of the agreements.
 
The Planning Commission and the power ministry had suggested pooling of the prices of imported and domestic coal to neutralise the impact of higher prices of imported coal.
 
Coal India also agreed to pay a penalty between 1.5% and 40% if it fails to supply the committed quantity of the fuel to power firms.
 
The fine can go up to 40% if CIL supply falls below 50% of the contracted quantity.
 
Coal India has set a production target of 464 million tonnes for the current financial year. The company had achieved 435.84 million tonnes in 2011-12 against the targeted 447 million tonnes.
 

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SBI chairman for abolition of CRR

RBI should either do away with CRR or compensate the banks for the losses incurred as the banking system was not earning any interest on it, SBI chairman Chaudhuri told reporters on the sidelines of the Ficci Banking Conclave

 
Kolkata: State Bank of India (SBI) chairman Pratip Chaudhuri today made a strong pitch for the abolition of cash reserve ratio (CRR), saying that keeping required funds with the RBI without any interest was costing the banking system about Rs21,000 crore, reports PTI.
 
RBI should either do away with CRR or compensate the banks for the losses incurred as the banking system was not earning any interest on it, Mr Chaudhuri told reporters on the sidelines of the FICCI Banking Conclave here.
 
“CRR does not help anybody and it is unfairly put on the banks. Why is CRR not applied to insurance and other companies who are mobilising deposits from the public?” he asked.
 
CRR, he said, should be phased out within a reasonable time-frame. “Phasing out of CRR would release scarce capital resources which will help the banks in reducing rates for the industry.”
 
Banks are required to keep 4.75% of their deposits with RBI.
 
Mr Chaudhuri said the other option was to increase the SLR, on lines of CRR percentage. Banks earn interest on SLR deposits.
 
About losses incurred by the banking system for keeping interest-free CRR deposits, Mr Chaudhuri said it was around Rs21,000 crore for the entire industry and Rs3,500 crore for SBI. 
 
Mr Chaudhuri said SLR deposits were sufficient to address the issues of solvency and liquidity in case of a failure and maintaining an additional CRR was superfluous.
 
When pointed out that RBI was using the CRR instrument to tackle inflation, Mr Chaudhuri said to some extent it was true.
 
“But present day inflation is not due to demand pressures, it is a result of inadequate supply in the system,” he added.
 
To a query, Mr Chaudhuri said many other banks and the finance ministry had put forward this view to RBI. “RBI has to take a call on it.”
 
Referring to SBI, he said the bank would attempt to reduce NPAs in the coming quarters.
 

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