The RBI's announcement of a 50 basis point reduction in repo rate not just came as a surprise but a welcome move as well, says industry sources.
Hailing the move, Nandakumar, President, Indian Chamber of Commerce and Industry Coimbatore said that the move would give a good push in improving the sentiment of the trade and industry.
The cut in policy rate would also help in lowering interest rate for individual and corporate borrowers and make other loans cheaper, he said.
The ICCIC president perceives that this would spur credit off take in the months to come, particularly in larger infrastructure investments.
Tirupur Exporters' Association President A Sakthivel said that the banks pass on the rate reduction to customers. “They should work out the reduction in their base rate,” he added.
Recalling the RBI Governor's concern about the weak external demand which resulted in lower exports, he said “the median base lending rates banks had fallen by only about 30 basis points, which is a fraction of the 75 basis points of the policy rate reduction between January and June, even after a passage of eight months since the first rate action by the RBI”.