Interest hike to impact India Inc's capex: CII

Mumbai: Industry body CII on Tuesday said the recent hike in interest rate by the RBI is likely to impact private sector capital expenditure, but hoped that a normal monsoon would alleviate the need for any further hike in rates in the coming months.

The body has also supported the proposal for the creation of a separate asset reconstruction company for the speedy resolution of stressed assets in the banking sector.

“The cost of doing business goes up because of the hike and it will impact capital expenditure by the industry," said Rakesh Bharti Mittal, CII president and vice chairman of Bharti Enterprises.

While addressing the media, he expressed hopes that a normal monsoon and supply side measures would have a cooling effect on inflation and the RBI could consider reversing its recent hike once inflation comes under its comfort level.

Last week, RBI hiked the policy rate by 25 basis point for the first time in four years to curb rising inflationary pressures. Mr Mittal also expressed concern regarding availability of credit to industry especially the small and medium enterprises.

According to him, lending restrictions on eleven public sector banks under the prompt corrective action by the RBI reduces their ability to support growth.

On the proposal to create a separate agency to tackle bad debts, he said, “The CII has been in favour of setting up the bad bank, because we need to resolve the NPAs from the banks’ balance sheets so that the the credit cycle can start moving forward”.