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Assocham, Ficci welcome RBI rate cut
05
Apr '16
Industry bodies Assocham and Ficci have welcomed the 25 basis point repo rate cut announced by the Reserve Bank of India today.

Assocham President, Sunil Kanoria said that though India Inc would have liked at least a 50 basis points cut in the policy interest rates by the RBI, the measures announced to inject enough liquidity into the system should enable banks to cut lending rates.

"The transmission in the interest rates at the ground level should factor in not only today's reduction in the Repo rate but also the new lending norms being affected by the regulator. Besides, adequate liquidity injection by the RBI should ease concerns of the banks over falling growth in deposits," said Kanoria.

However, the Assocham chief said that given the kind of stress in large sectors of the economy, particularly in the manufacturing, construction, infrastructure, the policy interest rates cut should have been bolder.

"Eventually, lower interest rates would have an all-round positive impact in terms of reducing the non-performing assets, increased investment, aggregate domestic demand and overall vibrancy in the system," said Kanoria. "Lower food inflation should have encouraged the RBI to be more accommodative."

Sharing the concerns of RBI over the impact of 7th Pay Commission on inflation, the Assocham president said, "The pay commission would not only lead to higher inflation but would have an adverse impact on the fiscal situation of the country."

Welcoming the reduction in repo rate by 25 bps, Harshavardhan Neotia, President of Ficci said, “RBI's decision to cut the repo rate and follow accommodative monetary policy stance is a positive step, given the favourable conditions with respect to inflation and fiscal stability. Ficci has for long advocated the need for greater cuts in the policy rate to stimulate demand and investments in the economy.”

“Additionally, several steps announced to ease liquidity should help in effective transmission into lending rates by the banks. The banks already have enough room to pare the lending rates owing to recent reduction in small savings interest rate up to 1.3 per cent as well as the introduction of the marginal cost of funds based lending rate (MCLR). We now look forward to banks taking the lead in supporting the investment cycle and improving economic growth”, Neotia added. (SH)

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Fibre2Fashion News Desk – India

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