Millennium Post

Industry captains hope against hope for post-Budget rate cut

After a surprise 0.25 per cent reduction in repo rate on January 15, the RBI today left the interest rate at 7.75 per cent in its bi-monthly monetary policy.

CII President Ajay S Shriram said a modest 0.25 per cent rate 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 year. He said the CII is hopeful that the RBI would resume its accommodative monetary policy stance in the next policy review and work in tandem with the government to bring back the investment momentum.

In a statement, industry body FICCI said there was a need for a cut of at least another 75 basis points during 2015 and its transmission by the banks to industry in the form of lower lending rates to boost growth on a sustainable basis. “...the RBI is clearly now looking at the fiscal consolidation measures that would be announced in the upcoming budget. Given that the government is committed to maintaining fiscal prudence, we are hopeful that the repo rate cut cycle would be resumed after the presentation of the Union Budget for 2015-16,” FICCI President Jyotsna Suri said. Finance Minister Arun Jaitley is scheduled to present the first full-fledged budget of the new government on February 28.

Assocham, President, Rana Kapoor said the government, if not the RBI, should nudge banks to transmit lower interest rates which have already taken place. “Whichever way it is possible, the cost of capital must come down for the entrepreneurs and the interest rate must also be down for the consumer to revive the demand,” he said.

Commenting on the policy, Alok B Shriram, President of PHD Chamber of Commerce and Industry said though, repo rate cut was expected, the 0.50 per cent cut in SLR is welcome and is expected to enhance banking sector liquidity.
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