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The RBI’s decision to maintain status quo was in line with expectations, given that there has already been a reduction of 50 bps in the last policy, according to Chandrajit Banerjee, Director General, Confederation of Indian Industry .
The focus has now shifted to the transmission of lower policy rates to banks’ lending rates.
Banks need to be ready to finance a pick-up in credit growth and the RBI should ensure that high-level of non-performing assets do not constrain banks from financing higher growth, said Banerjee.
The industry body, in a statement said, projections made by the RBI on GDP growth and CPI inflation are in line with CII expectations.
However, the RBI needs to note that WPI inflation as well as the GDP deflator continues to be negative, indicating deflationary trends in large parts of the economy, it added.
CII welcomed the RBI stance that it intends to maintain an accommodative policy stance.
Industry body FICCI on Tuesday said it would like banks to pass on the full benefits in the form of lower lending rates for both consumers and investors.
Reacting to the RBI keeping its policy repo rate unchanged, Didar Singh, Secretary General, FICCI, said "This is important for revving up overall demand in the economy, which is still far from being robust. Of particular concern is the demand in the rural areas that has weakened on account of deficient monsoons.”
GDP numbers had released yesterday showed an uptick and we are in the early stages of recovery, FICCI said in a statement.
However, it emphasised that for the growth momentum to be maintained and strengthened further, the investment cycle will have to be supported by all measures.
"The government has already taken the lead by front loading public investments and enhancing ease of doing business. A lower interest rate regime will fortify these efforts and support revival of domestic private investments” added Singh.
The policy statement indicates that the RBI is soon expected to finalise the methodology for determining the base rate based on the marginal cost of funds and the Government is also examining linking small saving interest rates to market interest rates.
"We look forward to these moves as these will allow for an improved transmission of repo rate movements in to lending rates by banks”, said Singh.
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