Home ECONOMY India Inc appreciates RBI, asks for banks to transmit cuts

India Inc appreciates RBI, asks for banks to transmit cuts

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New Delhi, Feb 3:

Appreciating the Reserve Bank’s decision to hold interest rates in the course of its scheduled policy review Tuesday, India Inc asked the central bank and the government to “nudge” banks to transmit onward benefits of the rate cut made last month.

Reserve Bank of India (RBI)The RBI Tuesday kept repo rate at which it lends to commercial banks unchanged at 7.75 percent.

“Appreciating the fact that RBI Governor Raghuram Rajan would like to wait for the Budget and the GDP data to come before he makes his next move on the policy interest rates, the central bank should really nudge the banks to do effective transmission of the rate cuts which have already taken place,” the Associated Chambers of Commerce of India (Assocham) said in a statement here.

“Excepting a few banks, a large number of them have not been passing the low cost of funds resulting from the previous reductions in the benchmarks,” said Rana Kapoor, Assocham president.

“The banks must be nudged… if not by RBI, at least by the finance ministry, the government being the owners,” he added.

The only cut the RBI made Tuesday was in the statutory liquidity ratio (SLR) — the mandatory amount of cash, gold, bonds or other securities that banks must keep with them — by 50 basis points to 21.5 percent of deposits from Feb 7.

Commenting on the monetary policy statement, Jyotsna Suri, president of the Federation of Indian Chambers of Commerce and Industry (FICCI) said: “Following a cut in the repo rate introduced last month, RBI has today (Tuesday) introduced a cut in the SLR rate by 50 basis points. This is a clear indication to the banking sector to make liquidity and funds available for productive purposes such as investments to spur growth.”

“With the government on one hand easing hurdles that have stalled large projects and RBI taking measures to direct more liquidity towards productive purposes, we hope that growth will get a boost going ahead,” she added.

Ajay S. Shriram, president of the Confederation of Indian Industry (CII) said the decision reflects a cautious approach of the RBI while tackling the growth-inflation conundrum.

“CII, however, welcomes the lowering of the statutory liquidity ratio by 50 bps which, by easing liquidity in the system, would ensure that funds would be available to the banking sector for onward lending. This, in turn, would provide a fillip to investment and growth,” Shriram said.

Though a repo rate cut was expected from RBI, 50 basis points cut in SLR is welcome and is expected to enhance banking sector liquidity in the coming times, said Alok B. Shriram, president, PHD Chamber of Commerce and Industry.

International accounting firm KPMG in India partner Shashwat Sharma said: “We appreciate RBI’s watchful approach on waiting for structural changes by the Government in the domestic economy before announcing further interest rate cuts. The SLR reduction should hopefully propel more growth in the economy.” IANS