India Inc disappointed over RBI decision to hold rates

India Inc disappointed over RBI decision to hold rates

FPJ BureauUpdated: Thursday, May 30, 2019, 03:08 AM IST
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New Delhi : Disappointed by the RBI’s move to leave the key rate unchanged, India Inc Wednesday said the central bank should have accorded precedence to revving up economic growth while curbing inflation. The industry argued that a rate cut would have propelled demand as interest rates remain unduly high. “In context of the current industrial situation, we felt there was a need for a further cut in the repo rate. Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers,” Ficci President Pankaj Patel said.

  “While RBI in the policy statement cites inflationary pressures to remain a concern, Ficci feels that we need to give equal consideration to growth prospects,” he added. The RBI Wednesday kept policy rate unchanged at 6 per cent as was widely expected in view of upward trend in inflation even as it cut the growth forecast to 6.7 per cent for the current fiscal. However, it slashed the Statutory Liquidity Ratio (SLR), the portion of deposits held by banks in government securities by 0.5 per cent to 19.5 per cent, freeing over Rs 57,000 crore to bank funds for lending.

“The Reserve Bank should have taken a bold move and cut the policy interest to boost the growth as the inflation level is still well within control,” said Assocham President Sandeep Jajodia. He claimed that while the RBI is always faced with the dilemma of choosing between growth and inflation, the overall national sentiment at present is for reviving growth and employment as the trade and industrial activity, particularly in the informal sector, is facing some disruption from GST.

 “What is not so pleasant is the fact that the credit policy does not give any indication of a rate cut even in the short to medium term, so the ball for growth revival is now completely in the court of the government through fiscal measures,” said Jajodia.

Taken note of RBI status quo, lower growth forecast: Finmin

The finance ministry Wednesday said it has taken note of the RBI decision to maintain status quo on interest rate and the downward revision of growth forecast for the current fiscal. The ministry, however, welcomed the initiative with regard to Peer to Peer (P2P) NBFC financing regulation, saying it would benefit smaller firm.

Paper on FX retail trading platform soon

The Reserve Bank of India

said it will issue a discussion paper by end Oct on foreign exchange retail trading platform. The RBI, in its Statement on Developmental and Regulatory Policies, proposed a mechanism that would allow retail investors to access an interbank trading platform for foreign currencies, and consequently provide them with transparent pricing.

RBI comes down heavily on MCLR

The Reserve Bank flayed lenders for keeping interest rates high and flagged concerns over base rate and marginal cost of fund-based lending rate (MCLR), saying these have not improved monetary transmission. An internal RBI group also suggested switching over to an external benchmark in a time-bound manner so that better rates are available to borrowers.

By retaining the focus on inflation targets, this policy ensures that the confidence of the investors on the Indian macro-economic indicators will continue.  Further policy action will be contingent on the evolution of the output gap and its impact on the inflation trajectory.” -Chanda Kochhar, MD and CEO, ICICI Bank

New FPI norms from April

The Reserve Bank said it will review the foreign portfolio investment norms and come out with a new set of regulations, to be effective next April. The new norms will facilitate the process of investment and hedging by Foreign Portfolio Investors (FPIs).

The policy was more or less along expected lines. Key policy rates have been kept unchanged due to upside bias to inflation.  In fact, CPI has been slightly revised to 4.2%–4.6% due to impact of crude and HRA effect in lieu of 7th CPC recommendations.

– Dinabandhu Mohapatra, MD & CEO, Bank of India.

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