Cautious RBI puts growth low on priority: ASSOCHAM

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New Delhi | April 06, 2017 7:08 PM

According to ASSOCHAM, the Reserve Bank of India (RBI) has been cautious in its approach, even as faced with a big challenge of managing excess liquidity following demonetisation.

“This would give a boost to the sector which has been witnessing tough times in the last few years. The decision really augurs well for the real estate sector,” he said. (Reuters)

According to ASSOCHAM, the Reserve Bank of India (RBI) has been cautious in its approach, even as faced with a big challenge of managing excess liquidity following demonetisation. The RBI has rightly decided to not go over-board and resorted to much feared measures like hike in Cash Reserve while leaving the policy interest rates unchanged is on the expected lines, the apex body said.

Commenting on the RBI’s first credit policy in the fiscal year 2017-18, ASSOCHAM President Sandeep Jajodia welcomed the permission given by the central bank to the banks to invest their funds in the Real Estate Investment Trusts (REITs).

“This would give a boost to the sector which has been witnessing tough times in the last few years. The decision really augurs well for the real estate sector,” he said.

Reading into the policy, the ASSOCHAM finds that the RBI remains quite cautious on inflation going forward, though some measures were required to lift the credit offtake and give impetus to the growth.

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While 25 basis points rise in reverse repo rate should help their bottomline, a clear road map, coupled with strong political will is required to resolve the issue of burgeoning non-performing assets.

“Though the RBI wants banks to work on the stressed assets, finer points and clear cut glide path is required to resolve the NPAs in a time bound manner,” said Jajodia, adding that the promised measures are to be rolled out soon.

However, the ASSOCHAM President revealed that the focus of the RBI appears to be on liquidity management and anchoring inflationary expectations; thus growth impetus may not be its priority area. In any case, with so much of surplus liquidity, the banks should be nudged further to transmit the lower cost of funds to the borrowers.

Jajodia also welcomed the RBI’s observations that the banks need to get well re-capitalised either from the market or its principal shareholders, the government.

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