The three apex chambers Assocham, CII and Ficci have welcomed the RBI?s move to reduce the repo rate by 100 basis points to 8% and are of the view that this will definitely serve as a confidence booster for the financial sector. According to Ficci, this move is in alignment with its suggestions to the liquidity committee and hopefully the real sector will now be able to access bank finance at a relatively lower cost.
?However, we feel that instead of making step by step announcements, there is a need for a big bang approach with deeper cuts at one stroke in repo as well as bank rate in order to signal lower rates of interest to the banking sector?, said Amit Mitra, secretary general, Ficci.
In addition to this Ficci has also been suggesting lowering of statutory liquidity ratio (SLR) rates and utilisation of a small portion of forex reserves for lending through banks to corporates for meeting their credit requirement and overcome the current liquidity crunch. As the inflation rate seems to be now softening to some extent, it is right time to shift focus to the growth that in the recent past has taken a severe hit.
Chandrajit Banerjee, director general, CII said, ?We are happy that RBI has taken this move as CII has always been recommending it very strongly. This would help in the availability and cost of finance and cost of credit. This would also help in pushing the investment demand and the growth?.
Assocham president, Sajjan Jindal said, ?The central bank?s decision has come at the right time as the economy had begun to come under the pressure of global slowdown. Interest rate cut would help in averting the downward pressure on the GDP growth rate. This measure would bring relief to the Indian financial system which was facing liquidity pressure and would also reinstate the lost investor confidence in the Indian economy.?
However, Assocham said that mutual funds which are reeling under the severe liquidity pressure are being charged 11-15% interest rates by the commercial banks despite the RBI?s special scheme to lend to mutual fund at repo rate. Mutual funds are one of the key instruments players in financial markets and need to be given adequate liquidity provision to deal with the present crisis.