Non-banking finance companies (NBFC) today said the Reserve Bank is likely to keep its key lending rate intact in the forthcoming monetary policy review, but expect a 0.25 per cent reduction in the cash reserve ratio.

“We expect not much change in the interest rates in this policy, but definitely the CRR, which is the portion of deposits banks park with the RBI, may be reduced by 0.25 per cent,” Director general Finance Industry Development Council (FIDC) Mahesh Thakkar, told reporters after meeting the RBI officials in a customary pre-policy consultation meet here.

The RBI will unveil its annual monetary policy on May 3.

Currently, the repo rate is 7.5 per cent, while the CRR is 4 per cent.

The demands by the FIDC, which is the apex body of NBFCs, is in tandem with the views of bankers, who also asked for a cut in the CRR for effective monetary transmission.

According to bankers, a CRR cut will help reduce their cost of funds, which is essential for cutting lending rates, rather than a repo rate cut.

During the meeting with Deputy Governors K C Chakrabarty, H K Khan and Urijit Patel, NBFCs, which included the heads of L&T Finance and Mahindra Finance among others, also discussed issues concerning the sector, Thakkar said.

Topics discussed included the Usha Thorat committee report, NBFCs’ long-standing demand to retain the cut-off for NPA classification at 180 days against the proposed new norms of 90 days and issues around capital adequacy, he said.

“The RBI said we are considering separately, maybe by the month-end we will come back on that,” he said.

Thakkar also said NBFCs have requested RBI to have stability in its policy, saying a lot of investors interested in the sector are looking towards a stable regulatory regime.

“The RBI should have a stable policy regime for a minimum of one decade. Once that is in, they will invest in a big way. It will help the economy well and also help achieve financial inclusion,” he said.

Pointing out to the current conditions, he said: “We don’t want a major change every two-three months like in our capital requirement or provisioning. Have something for 10 years at least.” He added that course correction should be made only if changes in the economic conditions so merit.

Citing how companies like Edelweiss and Reliance Capital have got foreign investments, Thakkar claimed he is in touch with over 20 interested foreign investors wanting to invest.

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