RBI repo rate cut welcome but auto industry seeks more growth incentives

by Autocar Pro News Desk , 23 May 2020

In its ongoing effort to boost liquidity and offer relief to borrowers, the Reserve Bank of India has cut the repo rate by 40 basis point to four percent. The Central Bank also extended the moratorium on existing loans by another three months till August 31.  
Welcoming these initiatives tailor-made to boost demand and help the sagging economic condition, 

Rajan Wadhera, president, SIAM stated that “40 bps reduction in repo rate, which takes the repo rate to 4%, is a very welcome step by RBI to support reduction in the cost of borrowing for traders and consumers and hence would positively impact consumer demand. We are hopeful that banks will pass on the benefit and support demand creation for discretionary products, like automobiles.”

Offering an industry perspective, Dr Raghupati Singhania, chairman and managing director, JK Tyre & Industries said the measures, “should encourage the Indian banking system to lend liberally at this time of Corona Pandemic crisis which has engulfed the manufacturing sector in particular. While these are welcome measures by the RBI, it is now crucial that rate cut gets transmitted by way of lower rate of interest to the corporates and lending by the banking system goes up substantially to somewhat mitigate the immediate concerns related to liquidity.”

Singhania however pointed out the need to take effective steps to generate demand through industry specific measures and put the economy on track. His suggestions include:  

-Reduction of GST Rates for a period of 3 years which may be reinstated after this period.

- The long pending scrappage policy of old vehicles for 15 years or so, more particularly in the commercial vehicle segment should be introduced.

- Special efforts to ensure adequate financing for potential customers for both CVs and PVs through the NBFC route.