Mixed reaction from India Inc on RBI move

India Inc responded with mixed reactions on RBI’s move to keep interest rates unchanged.

While industry body Assocham hailed the decision, FICCI and CII and PHD Chamber said a rate cut would have lifted sentiments. All of them, however, agreed that the cost of capital should come down anyway.

Assocham appreciated the fact that Raghuram Rajan would like to wait for the Budget and the GDP data to come before he made his next move on policy interest rates. It, however, said the central bank should really nudge the banks to do effective transmission of the rate cuts which have already taken place.

The RBI on Tuesday maintained status quo on interest rates, saying there have been no developments to warrant further easing since an unscheduled rate cut about a fortnight ago.

It kept the benchmark repo rate at 7.75 per cent, but cut the statutory liquidity ratio (SLR) — the amount of funds that lenders must set aside — by 50 basis points to 21.5 per cent of deposits from February 7, a move that will help banks to increase lending.

“A repo rate cut today would have perked up sentiments. We are hopeful that the repo rate cut cycle would be resumed after the presentation of the Union Budget for 2015-16,” FICCI said in a statement.

“We see the need for a cut of at least another 75 basis points during 2015 and its effective transmission by the banks to industry in the form of lower lending rates to boost growth on a sustainable basis,” FICCI said in a statement.

According to CII, a modest 25 bps cut would have further lifted sentiments and assured the markets that the monetary easing cycle is on course which would be followed by further cuts in rates during the course of the year.

PHDCCI too expressed its hope that going ahead, the RBI would cut rates by at least 50 basis points. “There is a need to rejuvenate the demand scenario in the economy to boost manufacturing growth and to create more and more employment opportunities.

So at this juncture, lower interest rates and lower cost of borrowings for the industry would be inevitable,” PHDCCI said.a