Reserve Bank of India's move to cut repo rate by 50 basis points is a welcome measure, said Mr Hemant Kanoria, chairman and managing director, Srei Infrastructure Finance Ltd.
“RBI has the habit of springing a surprise every time. This time too when the market was expecting a 25 basis point hike in policy rates, RBI reduced both repo and reverse repo rates by 50 basis points each. This is a welcome development for a stagnating economy as this is expected to spark off fresh investments,” Mr Kanoria said.
Infrastructure sector, which is highly interest rate sensitive, is expected to benefit from this cut.
However RBI's actions alone are not sufficient to improve the investment climate in the country. “I feel any pick-up in investment is now more reliant on easing of policy-related bottlenecks than on reduction in interest rates,” he pointed out.
The central bank's efforts need to be supplemented by government action on various policy fronts. “To attract investments in infrastructure, transparency and certainty on issues like taxation, land acquisition criteria and environmental clearance norms are a must,” he said.
There is a need to step up investments in order to address the supply-side constraints that have kept inflation at stubbornly high levels, he added.
Srei, Mr Kanoria said, would look forward to the draft NBFC guideline which is likely to be released by end-June 2012.