India Inc expects further cut in repo rate: Assocham

October 22nd, 2008 - 8:21 pm ICT by IANS  

New Delhi, Oct 22 (IANS) India Inc is hopeful that the Reserve Bank of India (RBI) would bring down repo rates to seven percent from the current eight percent and create a mechanism to monitor banks’ lending, according to an industry lobby survey.The survey, carried out by the Associated Chambers of Commerce and Industry of india (Assocham) among 105 chief executive officers (CEOs) and managing directors, said 77 percent of the participants were of the view that the RBI would further cut repo rates, the interest charged on borrowings by commercial banks, by 100 basis points to calm down volatility in domestic markets.

The recent slash of 100 basis points in repo rate was “a welcome move but we expect the bank to complement the move with further rate cut in the coming policy review,” Assocham president Sajjan Jindal said.

“The survey suggests that reasonable liquidity has already been infused into financial system as thousands of India Inc’s applications are pending with banks for sourcing loans. This fear psychosis needs to be removed from banking system with constant monitoring from the RBI on banks extending loans,” the survey report said.

According to the report, 54 CEOs expected a 100-basis-point cut, while 27 CEOs said the RBI would slash it by 50 basis points.

Of the total respondents, 63 percent maintained that the repo rate at eight percent was still at higher level when compared to the rest of the world.

They said a further rate cut would boost the industrial growth and help foster employment prospects.

“The industrial growth this fiscal has been a worrying factor for the economy. The industrial growth as shown by the Index of Industrial Production for August has slowed down to 1.3 percent, one of the worst performances on record,” the report said.

The central banks across the world have taken unprecedented actions by cutting their key interest rates to significantly lower levels to deal with financial crisis. The RBI has followed suit with a 250-basis-point cut in the cash reserve ratio and a 100-basis-point cut in the repo rate.

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