While welcoming the RBI’s decision to cut CRR rates by 25 bps, the industry has expressed disappointment that repo rates were unchanged.

FICCI saw the decision to reduce CRR as “a calibrated attempt” to inject liquidity into the banking system. R. V. Kanoria, President of the industry chamber, said “both the regulator and the Government seem to have recognised the problem equally and have shown pro-activity in their respective domains”.

‘Deeply disappointed’

However, Assocham said that it is “deeply disappointed”, as it had expected a “substantial cut” in the repo rate. This was expected to be a follow-up of the slew of reforms announced by the Government last week.

It added though that though the cut in the CRR rate would somewhat address the problem of liquidity, banks may also be prodded into marginally reducing the retail loan.

“Assocham is concerned over the fact that the RBI has missed an opportunity to use the monetary policy to pump the demand, especially in the coming festive season. The sentiment, which looked up after the Centre took courageous reforms-friendly decisions like FDI in multi-brand retail and hike in diesel prices, has been negated by the RBI inaction today,” said Assocham chief, Rajkumar Dhoot.

‘Reasonable expectation’

CII said the cut in repo rates was a “reasonable expectation” from the central bank. “Additional liquidity in the system would help the current situation, where availability and cost of credit have been a challenge, particularly for the SMEs. However, given the slew of reform measures announced by the Government, including the ones aimed at fiscal consolidation, CII had hoped that the RBI would also move in favour of growth and cut repo rates,” said Chandrajit Banerjee, Director-General, CII.

CII also shares the concern with RBI on the fluctuating international oil prices and suggests that a separate window be created out of the foreign exchanges reserves to fund the petroleum imports by the OMCs directly.

> roudra.b@thehindu.co.in

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