India Inc slams RBI not cutting rates

The Reserve Bank's decision to cut the Cash Reserve Ratio (CRR) by 0.25 per cent - the percentage of deposits banks keep with central bank - has received mixed response from India Inc, which has been demanding a reduction in interest rate to spur growth.

Interest rates on home and car loans may ease despite the key policy rates left unchanged by the RBI which lowered the CRR by 0.25 per cent to unlock Rs 17,000 crore of liquidity into the system.

Industry body CII welcomed the move: "Additional liquidity in the system would help the current situation, where availability and cost of credit have been a challenge, particularly for the SMEs."

However, RBI's cautious stance of keeping short-term lending and borrowing rates unchanged in view of high nflation disappointed the industry.

Assocham said, "The Reserve Bank of India has once again deeply disappointed the industry which was expecting it to worry about a sharp deceleration in growth and go in for a substantial cut in the interest rates."

"The 25 basis points cut in the CRR rate would somewhat address the problem of liquidity and the banks may also be prodded into marginally reducing the retail loan, but these steps will certainly not curb the problems that the Indian industry is facing," he said.

FICCI President, R V Kanoria has described the RBI's decision to reduce CRR as "a calibrated attempt" to inject liquidity into the banking system.

"Both the regulator and the Government seem to have recognised the problem equally and have shown proactivity in their respective domains," he said.

"We hope that the RBI continues with this stance and we look forward to a rate cut and repo rate cut in RBI's second quarter review of monetary policy next month," Kanoria said.

CII Director General Chandrajit Banerjee said, "Demand pressures according to RBI have eased and therefore, a cut in headline rates is a reasonable expectation from the Central Bank."

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