The 25 basis points cut in the repo rate was expected but a similar cut in the cash reserve ratio is indeed a bonus, said Vikash Sureka, Chief Financial Officer, IBS Software Services.
Coming after nine months, the reduction signals RBI’s confidence in keeping inflation under control despite extra money being infused into the system, he told Business Line .
“Hopefully, the macroeconomic dynamics has entered a period of stability and we can look forward to reigning in the current account and fiscal account deficit, which were getting worrisome.”
The reduction in the rates will come as a relief for the banks as a high CRR ratio locks up funds for which they earn nothing. Now banks will have more to lend. The additional liquidity will make credit less scarce and less dear, benefiting businessmen and individuals.
This should fuel all-round growth and also have a positive impact on business sentiment to create new investment opportunities. “Directionally, this is a great step forward and we hope that there is further headroom left for future cuts,” Sureka said.