The industry body's statement comes as the RBI fell short of announcing a rate cut on Monday and instead declared its decision to conduct dollar-rupee sell buy swaps and more long term repo operations (LTROs) worth Rs 1 lakh crore.
The apex bank in its last MPC meet in February kept the repo rate unchanged at 5.15 per cent in view of the uptick in inflation.
Chandrajit Banerjee, Director General, Confederation of Indian Industry said: "We were buoyed by the bouquet of innovative measures introduced by RBI in its last monetary policy. The need of the hour is to continue with more such innovative steps apart from announcing a rate cut by at least 50 basis points."
The chamber noted that the outbreak of coronavirus has endangered the expectations of a global recovery in 2020, emerging as the biggest global concern by crippling China and significantly impacting global supply chains.
Global policymakers are trying to support financial markets and the real economy through coordinated policy actions, it said, adding that it is time that the domestic policymakers also join in orchestrating the coordinated policy response. This assumes importance, given the fact that COVID-19 is likely to exacerbate the specter of slower growth domestically as clampdowns are increasing both within and outside India, which would curtail consumer mobility and lead to deferral of spending, said the CII statement.
The RBI should not hesitate to cut rates by even a larger proportion, in line with global central banks, Banerjee said. The US Federal Reserve has already lowered interest rates to near zero as coronavirus has spread rapidly.
On the anticipation that the RBI would announce a "much-needed" rate cut, Das told reporters that only the Monetary Policy Committee can cut rates, however, nothing can be ruled out the RBI is ready to take action as and when necessary.
It noted that while a further increase in quantum of liquidity support to be provided under the Long-Term Repo Operations (LTROs) is welcome, additional targeted liquidity support to sectors such as MSMEs is need of the hour, where problems have exacerbated due to the disruptions in global supply chains.
"RBI could take a leaf out the recent measures announced by the European Central Bank (ECB) Aby launching a new round of targeted longer-term refinancing operations (TLTROs) to support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises," said the CII DG.
In addition to providing support to various sectors and economy in general, the RBI also needs to take definitive steps to prevent the build-up of stress in the banking sector. The recent fiasco at Yes Bank has exposed the chinks in the armour of the banking sector once again, Banerjee said.
He also said that the role of RBI as the central bank and supervisor and monitoring authority of banks needs to be reconsidered.
"While the RBI as the central bank keeps check on monetary policy, currency, forex etc, a separate unit may be created under the aegis of RBI which will be completely responsible for oversight, monitoring and supervision of banks (both private sector and PSBs). This will ensure efficacy in the performance of the distinct roles of RBI as the central bank of the country as well as the regulator of the banks in India", added Banerjee.