India Inc asks banks to pass on rate cuts to revive growth

With the Reserve Bank of India painting an optimistic picture for the rest of the financial year 2016-17 (FY17) and cutting rates, India Inc said it would accelerate new investments as lower interest rates would encourage customers to spend more in the coming months. Chief executives also demanded banks pass on the benefits of the reduction in rates, which are at a six-year low.

In its policy, RBI said though recent data of index of industrial production (IIP) turned out to be slower than a year ago, the outlook remains bright. "Public investment in roads, railways and inland waterways, recent efforts to unclog cash flows in large projects under arbitration, and boost to spending from the Seventh Pay Commission's award should improve the industrial outlook," RBI said.

"Looks like all the pieces are falling into place. Bravo to the new governor and Monetary Policy Committee (MPC) for recognising that growth is now the priority," Anand Mahindra, chairman, M&M, said after the RBI surprised corporate India with a 25-basis point cut.