CRR Cut Boosts Liquidity, Aids Exporters: FIEO

New Delhi, Dec 6 (PTI) The RBI's decision to cut Cash Reserve Ratio (CRR) will increase liquidity in the system, thereby helping exporters get credit at easy terms, FIEO said on Friday.

Cash Reserve Ratio is the proportion of deposits that banks must keep with the central bank. The RBI has slashed CRR by 50 basis points to 4 per cent, effective in two tranches on December 14 and December 28.

Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said exporters are already facing challenges at liquidity front.

"In such times, the CRR cut will help increase flow of money," he told reporters here.

The CRR cut will infuse Rs 1.16 lakh crore into the banking system and will soften short-term interest rates and can reduce the pressure on bank deposit rates.

FIEO has earlier stated that the declining bank credit to exporters will hurt the sector.

While exports grew by 15 per cent in the rupee terms between 2021-22 and 2023-24, the outstanding credit in March 2024 dropped by 5 per cent over the same month in 2022, according to the apex exporters body.

FIEO President Ashwani Kumar said now the government should consider extending interest equalisation (or subsidised) scheme for exporters for up to five years.

"Availability of credit will help us in increasing manufacturing and boosting exports. So cost of credit should be reduced. It will be a major help to MSMEs in enhancing our competitiveness," Kumar said.

Sharing similar views, Hand Tool Association Chairman S C Ralhan said that global uncertainties have led to delay in payments.

"We need loans at affordable rates to increase shipments," Ralhan said.

Asked about US President-elect Donald Trump's pledge to impose high customs duties against China, Sahai said it would provide export opportunities to Indian exporters as demand will shift here.

"It is very unlikely that the US would increase duties on Indian goods," he added.

Jalandhar-based handtool exporter A K Goswami said that demand in Europe is "good" and "I expect a healthy growth in engineering exports this fiscal".