India Inc. is disappoint over RBI’s decision to hold rates


New Delhi, Oct 4:  India Inc. on Wednesday expressed its displeasure over the Reserve Bank of India (RBI)’s decision to maintain its key lending rates.

“Ficci is disappointed that the Monetary Policy Committee (MPC) has chosen to hold the repo rate and not reduce it… In the context of current industrial situation, we felt that there was a need for a further cut in the repo rate,” said Pankaj Patel, President of the Federation of Indian Chambers of Commerce and Industry (Ficci).

“Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers. While RBI in the policy statement cites inflationary pressures to remain a concern, Ficci feels that we need to give equal consideration to growth prospects.”

Patel added that real interest rates had been unduly high and a cut in policy and lending rates would have helped propel demand for interest-sensitive sectors such as consumer durables, auto and housing.

As per the central bank’s fourth bi-monthly monetary policy review of 2017-18, the repurchase rate, or the short-term lending rate for commercial banks on loans taken from it, has been maintained at 6 per cent.

Consequent to the decision to maintain the repo rate, the reverse repo rate was also retained at 5.75 per cent.

“Although a repo rate cut was expected from RBI, a 50 basis points cut in SLR (statutory liquidity ratio) is welcome and is expected to enhance banking sector liquidity in the coming times,” said Gopal Jiwarajka, President, PHD Chamber of Commerce and Industry.

“However, downward projection of real GVA (gross value added) growth to 6.7 per cent for 2017-18 is a matter of concern. At this juncture, softening of monetary policy stance is one of the critical steps to re-capture industrial activity which is impacted by multiple factors and high borrowing cost is one of them,” added Jiwarajka.

Sandeep Jajodia, the Assocham President, said: “The RBI should have taken a bold move and cut the policy interest to boost the growth as the inflation level is still well within control.”

“What is not so pleasant is the fact that the credit policy does not give any indication of a rate cut even in the short to medium term, so the ball for growth revival is now completely in the court of the government through fiscal measures,” Jajodia said.

For Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank, the RBI’s announcement to keep the policy rate unchanged was on expected lines.

“The MPC has not viewed the recent growth slowdown as being structural in nature and is expecting it to be transient with growth prospects likely to improve over the medium term,” said Kocchar.

“The MPC has also reiterated the need to support investment activity and the gamut of measures that are being undertaken by government will help this process significantly.”

Lead Economist at Deloitte, Anis Chakravarty, felt the onus now was on the policy makers to give economy a boost by trying to resolve the NPA (non-performing assets) issue faster by “restarting stalled projects and increasing the ease of execution in the economy”.

“That said, there still exists the possibility of one more cut in the fiscal year, which will in turn depend on the growth and inflation prints. A further deceleration in growth with inflation largely under control could see some monetary action,” Chakravarty added.

Post the RBI’s previous policy stance (in August) to reduce the repo rate by 25 basis points, retail inflation had seen an increase and reached around 3.36 per cent in August, its highest point in the last 3 months, noted Govind Sankaranarayanan, Chief Operating Officer – Retail Business and Housing Finance, Tata Capital.

“This coupled with recent trends in the global economy — spike in crude oil and the weakening of the rupee — has forced the RBI to take a calculated decision to keep the rate unchanged,” said Sankaranarayanan.

“However, from an NBFC (non-banking financial company) standpoint, the unchanged rate will have a minimal effect on the home loan, auto loan and white goods sector, the demand for which have remained steady and are expected to grow over the next two months as the festive season continues,” he added.


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