Govt, India Inc cheer rate cut

RBI loosens grip : Slashes repo rate, CRR by 25 bps

A cut in key interest rates by the Reserve Bank of India by 25 basis points coming after nine months was welcomed across the board by the government, policymakers, industry and investors.

Commerce and Industry Minister Anand Sharma called it a positive step that would infuse liquidity and help in catalysing economic growth.

Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said that RBI’s decision to cut interest rates will stimulate investment and help in anchoring inflationary expectations.

Indian Banks' deposit advances and deposits grew at a slower pace in the first nine months (April-December) of the financial year 2012-13 compared with a year earlier.

While banks' advances or credit grew 7.4 per cent, compared to 10.5 per cent a year earlier, deposit growth was 7.3 per cent compared to 11.3 per cent in the same period a year ago. Banks are expected to cut lending rates following the RBI's decision to cut short term lending rate as well as unlocking Rs 18,000 crore by slashing cash reserve ratio (CRR) by 25 bps. Industry Chamber Ficci's banker President Naina Lal Kidwai said it will hopefully help in reversing the anaemic industrial growth observed over the last year, while CII said the cut will help the sentiment of both consumers and investors alike.

 Assocham President R N Dhoot said that he reduction was a step in the right direction. However, the system has to take this in the true spirit and the benefits have to be passed on to the end users, he added.

Apparel Export Promotion Council's Chairman A Sakthivel said, “The tight liquidity condition which was prevailing since long would surely ease out.” “It will, in turn, boost our economy and robust the structural deficit.”

The repo rate reduction will facilitate banks and housing finance companies to reduce home loan rates marginally which will benefit consumers, S Sridhar, Advisor RICS-South Asia said .

The Fitch Group firm India Ratings and Research said the RBI move would have positive impact of rate sensitive sectors such as housing, consumer goods and automobiles.

 Federation of Indian Export Organisation President Rafeeque Ahmed said, “The combined impact of these cuts may see some upsurge of bank credit to industry which had decelerated and hopefully a reversal in the average industrial production growth in the first eight months of this fiscal year.”