RBI complements Govt efforts to boost growth

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Mumbai, November 1:: Paving the way for easing home, car and commercial loan rates, RBI today announced steps to pump in an estimated additional Rs 85,000 crore in the system by cutting deposit requirements and key rates, a move that complements the government's steps to boost economic growth.

RBI cut the mandatory cash reserve and statutory liquidity requirement for banks by one percentage point each, besides lowering the rate at which it lends short-term funds to banks by 50 basis points, a day after the Finance Ministry altered duties to help the aviation and steel sectors.

The series of measures by both RBI and the Government comes days ahead of the Prime Minister's meeting with captains of Indian industry to assuage fears about economic slowdown as also liquidity crisis in the face of a global financial meltdown.

Bankers, however, are opting to wait and assess the liquidity position before taking a call on lowering lending rates to commercial and retail borrowers, all of whom are crying hoarse about the sky high cost of loans - which in turn has cast a shadow on the economy. Already, industrial production growth dropped to a meagre 1.3 per cent in August.

"It is a highly welcome move by RBI ... But more steps are needed from policy makers for lowering interest rates by 3-4 per cent," apex industry chamber CII's President K V Kamath, who is also the head of the largest private sector lender ICICI Bank, told PTI.

Late last evening, the finance ministry in a major breather to cash-strapped aviation industry had abolished five per cent customs duty on aviation fuel, the high prices of which were eating into the financial health many an airline.