Re Impact: FM Calls For Bankers-Industry Meet

In the backdrop of the sharp slowdown in industrial growth in July and the secular appreciation in the value of the rupee, finance minister P Chidambaram has called for a joint meeting with the captains of industry and bank chiefs on Friday.

Bankers said the finance minister may discuss issues related to the impact on exporters due to a strong rupee. Exporters have been hit badly considering that the Indian currency has appreciated by 11% since January 2007. The relative slowdown in loan growth, the interest rate scenario and funding of projects may also figure in the talks, said bankers.

“A joint meeting is being convened so that grievances from both sides can be heard and then the government can address the issues related to a possible slowdown in the economy,” said a banker. The index of industrial production (IIP) registered a growth of 7.2 % in July this year compared with 13.2% a year ago, signalling a nine-month low in the index. The manufacturing sector growth slowed down to 7.2 % in July compared with a growth of 9.8 % in June and 11.7 % in May this year.

According to bankers, the impact of the monetary tightening measures launched by RBI is now being felt with a slowdown in some industrial segments and lower offtake of credit. A few senior bankers have in fact publicly made out a case for the central bank to ease up on tightening, saying it could hamper growth.

Several times in the past, the finance minister had made it clear to bankers that the manufacturing sector should not be denied credit. He had even stated publicly that banks should not raise lending rates steeply. “In the past, the FM had maintained that banks should not charge high rates only because of their inefficiency in managing margins. Thus, the issue of interest rate may again be raised in the meeting since industrialists have always complained about high rates,” said a banker.

Among corporates chieftains, Ratan Tata of Tata group and Jagdish Khatter of Maruti Udyog will be present. The banking fraternity will be represented by SBI chairman OP Bhatt; Punjab National Bank CMD KC Chakrabarty; Bank of India chairman TS Narayanasami and Canara Bank’s MBN Rao.