India Inc split over RBI move

Bankers see status quo on rate hike

Ficci said any further tightening of the monetary policy regime would have “adverse” consequence on industrial and economic growth.

CII, however, felt “RBI has performed a fine balancing act in its third quarter review of monetary policy 2009-10 by not increasing policy rates to support the economic recovery process and at the same time addressed the issue of price stability by sucking out excess liquidity from the system”.

Assocham said RBI had manifested it’s firm determination under given circumstances to rein in inflationary expectations without putting a spanner on growth wheel. PHDCCI felt that the hike in CRR would slowdown the “nascent” industrial recovery.

Right direction

The Centre, on its part, welcomed Reserve Bank’s decision to hike Cash Reserve Ratio (CRR) saying it would curb excess liquidity thereby dousing inflationary expectation.

Finance Secretary Ashok Chawla said “this is in right direction and appropriate.” Assuring that interest rate will remain in tact, he said the finance ministry was of the view that hike in CRR would have an impact on excess liquidity in the system.

On RBI’s forecast of 7.5 per cent economic growth rate for current fiscal 2009-10, Chawla
said it was in line with the government’s own projection.

“This shows the growth process is on track. High growth means generation of more demand for goods and services. This in turn will help the corporate sector to improve their financial performances,” he said.

HDFC Vice Chairman Keki Mistry said he did not see banks hiking rates immediately. They will exercise more caution and I don’t see them immediately hiking rates because they are sitting on a lot of liquidity.

ICICI Bank CEO Chanda Kochhar said: I don’t see any immediate impact on interest rates. There is some flattening of curve in rates. Also, I completely agree with the optimism on gross domestic product growth rate.

Taimur Baig of Deutsche Bank said: I do not think money will get dearer because interest rates remain historically low. Liquidity will also not get dearer because between the liquidity adjustment facility.

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