RBI may have given more robust signal to industry, says Montek

Planning Commission Deputy Chairman Montek Singh Ahluwalia said the RBI could have given a more robust signal to the industry after a 25 basis points rate cut which was widely expected to reduce cash reserve ratio too to inject liquidity in the banking system facing cash crunch.

 "The rate cut is a signal and I have to say that it is in the right direction", he said, while addressing an Assocham conference here.

 "We are looking at it with unhappiness. We feel, the signal should have been stronger...Many people would say that the signal should have been more robust than 25 basis points,” Ahluwalia said while commenting on RBI's decision to cut short-term (repo) rate by 25 bps to 7.5 per cent to boost growth.

 "I am glad that RBI has signalled continuing reduction of the rate," he said, adding the macro economic situation has started turning around for the better.

 "The reduction in repo rates by 25 basis points is a welcome move and indicates continued focus on growth. At the same time, RBI's commitment towards maintaining adequate liquidity in the system is important in the context of continued smooth functioning of markets,” Chanda Kochher, MD and CEO of ICICI Bank said.

 Federation of Indian Export Organisations (FIEO) President Rafeeque Ahmed said the 25 basis points  is welcome and may assuage various sectors of trade and industry and the market sentiment.

Work in tandem

“The decision of RBI to reduce repo rate by 25 basis points in response to the fiscal consolidation efforts made by the government has sent a strong signal that the RBI and the government would work in tandem to bring growth back to the economy,”  CII President Adi Godrej said.

Finance Minister P Chidambaram had on Monday said that he expected the RBI to address the liquidity shortage in the banking system and his remarks had renewed hopes among investors that the RBI will also cut the CRR to help banks with adequate cash in hand.