Thaindian News

New Delhi, April 20 (IANS) Industry lobbies Tuesday hailed the Reserve Bank of India’s move to tame inflation by hiking policy rates by 25 basis points.
“This is the best bargain in the prevailing situation. But we had wished that the reverse repo rate would not have been raised so that banks do not resort to parking of funds. The hike in reverse repo should not encourage banks to park large additional funds with the RBI,” said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry (FICCI).

He said that the RBI has been sensitive to the need for controlling inflation as well as not hampering growth drastically.

“The 25 basis points hike in repo rate would certainly put pressure on interest rates. However, given the situation we expect lending rate hike should not be imminent. The squeeze on liquidity by raising CRR by 25 basis points will also have an impact on the market,” he added.

However, given the prevailing liquidity conditions this should not be too hard either, he further said.

Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII), said: “The RBI will need to calibrate further tightening given that industrial growth and investments need to be supported through the availability of funds at a reasonable rate.”

“The RBI is aware of the challenges being faced by industry at a time when credit growth is picking up and capacity expansions are taking place,” he added.

The Associated Chambers of Commerce and Industry of India (Assocham) said the RBI policy was on expected lines.

“The well calibrated and positive move by RBI to increase key policy rates by 25 bps is a right step in right direction to contain inflation, move towards sustained recovery and meet the government borrowing as well as private credit demand,” said Assocham president Swati Piramal.

The increase in CRR by 25 bps, she said, will ensure withdrawal of Rs.12000 crore, a modest amount of liquidity, to further contain inflationary expectations.