India Inc welcomes RBI decision to slash key rates

November 1st, 2008 - 6:46 pm ICT by IANS  

New Delhi, Nov 1 (IANS) Hours after the central bank announced cuts in key rates, the major industry lobbies in the country Saturday welcomed the move and said it would infuse “enough liquidity” into the system, helping the industry. Earlier in the day, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points to 7.5 percent, the cash reserve ratio (CRR) by 100 basis points to 5.5 percent and the statutory liquidity ratio (SLR) by 100 basis points to 24 percent.

The repo rate is the interest charged by the central bank on borrowings by commercial banks, the cash reserve ratio is the minimum cash they have to retain, while SLR is the amount that these institutions have to maintain as government securities.

Describing the move as a right decision, the Associated Chambers of Commerce and Industry (Assocham) said it will lead to reduction in lending rates.

Assocham secretary general D.S. Rawat said the chamber continuously had been stressing the need for reduction in repo, CRR and SLR, and it was happy that the RBI brought them down considerably.

“With this, not only the interest rates would subside but enough liquidity come into the market to help India Inc expand, diversify and modify its plans,” the Assocham said in a statement.

However, the industry lobby said the rates should further be brought down to tabilise the financial markets.

According to Chandrajit Banerjee, director general of the Confederation of indian Industries (CII), the RBI’s measures are timely, coming on the back of serious concerns about the availability of credit at reasonable rates.

He said: “At one go, the RBI has applied itself to the multiple issues of liquidity shortage, high cost of funds, depreciating rupee and systemic risks which face the mutual funds and the NBFCs (non-banking finance companies).”

“We hope that banks will now follow the signal from the RBI and lower lending rates,” Banerjee said.

The CII added that along with these measures, the RBI could also think of relaxing the restrictions on foreign institutional investors’ investment in the government debt market, so as to develop a new class of buyers for these securities.

Related Stories

    Posted in Uncategorized |

    Subscribe