RBI policy to hit credit flow

Written by Economy Bureau | Kolkata, Oct 30 | Updated: Oct 31 2007, 07:54am hrs
The Reserve Bank of India's decision to raise the cash reserve ratio to 50 basis points to 7.5% has created mixed reactions among the chambers in Kolkata.

While Atul Churiwala, president of the Merchant's Chamber of Commerce, said the move would suck about Rs 15,000 crore from the banking system, and thus would have an impact on both liquidity and cost of funds, PR Agarwal, president of the Bharat Chamber of Commerce, said the RBI move would hamper credit flow to the manufacturing sector as interest rates would become high.

Agarwal said RBI's mid-term review of the annual credit policy for the year 2007-08 has pushed forward reforms in the banking system, which would enable the banks to fulfil their basic role as the financial intermediary.