The Reserve Bank of India (RBI) has decided to reduce the Cash Reserve Ratio (CRR) by 0.50%, bringing it down to 4%. This change will take place in two steps on December 14 and December 28. The CRR is the amount of money that banks must keep with the RBI, and lowering it will allow banks to lend more money.
The Federation of Indian Export Organisations (FIEO) thinks this is great news for exporters, who are struggling to find enough money to run their businesses. Ajay Sahai, the Director General of FIEO, mentioned that this cut will help put more money into the banking system, making it easier for exporters to get loans.
With this CRR change, banks will have about Rs 1.16 lakh crore (1.16 trillion rupees) extra to lend. This could lower short-term interest rates, which means loans may become cheaper. FIEO has warned that if banks don’t lend enough money to exporters, it could hurt their business.
In the last two years, exports went up by 15% in terms of money earned, but bank loans to exporters dropped by 5%. FIEO President Ashwani Kumar believes the government should extend help for exporters with low-interest loans for up to five years. He stated that more affordable loans will help increase manufacturing and boost exports, especially for small businesses.
S.C. Ralhan, Chairman of the Hand Tool Association, echoed these thoughts, saying that global issues have made it harder to get paid on time, and affordable loans are necessary for shipping more products.
When asked about U.S. President-elect Donald Trump’s plan to apply high taxes on Chinese goods, Sahai said this could create new opportunities for Indian exporters as demand may shift to India. He believes that the U.S. is unlikely to increase taxes on Indian products.
A K Goswami, a hand tool exporter from Jalandhar, said he sees good demand in Europe and expects strong growth in engineering exports this year.
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