Reeling under slowdown, India Inc today hailed Reserve Bank's move to reduce repo rate and CRR by a quarter%, saying it will spur growth and ease the prevailing tight liquidity condition.
"It is a positive step which will infuse liquidity and help in catalysing growth," Industry Minister Anand Sharma said in Agra.
Industry houses are emphatic with the RBI pruning repo rate and CRR by 0.25% each after a long nine months in its third quarter monetary policy review.
Adi Godrej, chairman, Godrej Group and president, Confederation of Indian Industry
It is good there has been both a repo rate cut as well as CRR cut today. The move by the Reserve Bank of India is welcome. I am expecting further rate cuts during the 2013 calendar year. I feel a 200 basis point cut including the current 25 basis point cut in policy rates will go a long way in boosting investment demand. With every rate cut, the average cost of funds comes down for companies. So yes, this is a good move. And more this will stimulate growth.
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Venugopal Dhoot, chairman, Videocon Industries
Cutting policy rates by a quarter percentage point hardly means much. I was expecting more. Having said that, the central bank will have to keep the momentum going. I hope this will not be a one-off affair like it was last year, when there was a 50 basis-point rate cut in April. After that, the next rate cut has happened now. I hope to see more of this going forward.
H M Bharuka, managing director, Kansai Nerolac
The move by the RBI is welcome, though a 50 basis point cut would have been better. The rate cut was long overdue and had it not happened, there would have been a lot of non-performing assets that would have come into the system. Why? Because it was simply becoming difficult for companies to pay a high rate of interest on their loans. At least, lending rates will ease now. So cost of funds will come down.
Shantanu Dasgupta, vice-president, corporate affairs & strategy, South Asia, Whirlpool
The move to reduce policy rates was long overdue. It has finally happened. Will it make a material difference to companies? While cost of funds will come down, it will not be substantial. Inflation is a big issue, yes, but India needs growth as well. Because when there is growth, I mean, GDP growth, that will stimulate domestic demand and help sectors such as ours, which depend on disposable incomes. Its no secret that people have been deferring their purchases, with the move to cut rates, certainly I see an impact on sentiment.
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"It was much needed given that GDP growth is moderating and industrial production is decelerating month after month. The rate cut is an encouraging move when high interest rates were having negative impact on the country's economic growth," JSW Steel Joint Managing Director and CFO Seshagiri Rao said.
Ficci's banker President Naina Lal Kidwai said,"This will hopefully help in reversing the anaemic industrial growth observed over the last year."
"In fact high borrowings under the LAF window seen in the recent past clearly reflected the tight liquidity situation. Release of Rs 18,000 crore with CRR cut of 25 basis points will help in easing the funds flow situation," she said.
Assocham President R N Dhoot said: "The reduction is a step in the right direction. However, the system has to take this in the true spirit and the benefits have to be passed on to the end users."
Apparel Export Promotion Council's Chairman A Sakthivel said, "The tight liquidity condition which was prevailing since long will surely ease out. It will, in turn, boost our economy and robust the structural deficit in the system by infusing the permanent primary liquidity in the system."
Seshagiri Rao, JMD & Group CFO, JSW Steel said, it is heartening that RBI has cut 25 basis points both in CRR and Repo rate. It was much needed given that the GDP growth is moderating and industrial production is decelerating month after month.
Reserve Bank of India (RBI) rate cut is an encouraging move at a time when high interest rates were having negative impact on the country's economic growth.
There are tight liquidity condition in money market as reflected by borrowings under repo window over Rs 1,00,000 crore. More liquidity injection by RBI is the need of the hour as 0.25% CRR cut releases only Rs 18,000 crores.
The transmission of lower interest rate to borrowers in response to cut in repo rate should take place swiftly as the banks have already reduced deposit rates for the past few months.
