New Delhi: Commending the recently framed Monetary Policy Committee’s turn to cut key strategy rate by 0.25 for each penny, India Inc on Tuesday said it will help opinion and reinvigorate development driving forces and trusted that banks will transmit the advantage to borrowers.
“The cost of capital has to be more competitive to drive investments. Businesses need to see an urgent revival in growth. Also, a moderate interest rate regime will lead to an uptick in interest sensitive sectors such as consumer durables, automobiles and housing,” Ficci president Harshvardhan Neotia said.
“The maiden policy decision taken by RBI’s MPC is completely justified by the ongoing disinflation in the economy. Today’s rate cut will boost sentiment and contribute towards reinvigorating growth impulses in the infrastructure, construction & manufacturing sectors.”
“Backed by a healthy set of domestic macros and sustained global deflation, I expect 75 bps further easing in the coming months,” said Rana Kapoor, MD and CEO of YES Bank.
The cut, first in six months, came amidst a big clamour for easing rates especially after the departure of former Governor Raghuram Rajan, who was often accused of stifling growth by keeping rates too high.
“At the anvil of the busy credit season when the demand for bank credit is anticipated to go up, the RBI intervention to reduce interest rates and other welcome liquidity supporting measures would enable banks to transmit the cut to borrowers and thereby support the growth cycle,” CII director general Chandrajit Banerjee said.
In a Facebook post, Union Minister for Power, Coal, New and Renewable Energy and Mines Piyush Goyal said the repo rate cut will guarantee quick development and give a help to the administration’s Make in India drive, fast framework creation and moderate force.
The six-part Monetary arrangement Committee, headed by Mr Patel, lessened repo rate – the fleeting rate at which the RBI loans to banks – to 6.25 for every penny. Therefore, the converse repo rate has additionally descended by a comparable rate point to 5.75 for each penny.The move will prompt lessening in loaning rates by banks, prompting lower EMI for lodging, auto credit and corporate borrowers.
“The industry expects a lot of value addition from the MPC and possibly another rate cut before March 2017, while expecting the real transmission of the lower rates by the banks,” Assocham secretary general D S Rawat said.
“The rate cut should spur growth and the corporate sector should see it as an encouraging move to foster investment. However, the speed of transmission of this rate cut would be an important determinant,” president of the Indian Merchants Chamber Deepak Premnarayen said.
Sterlite Power CEO Pratik Agarwal said: “Obviously India is resolved to keep up a 1.5-2 for every penny genuine rate of interest. This will fulfill the pressing requirement for development furthermore support funds in the meantime.”