Business
India Inc disappointed with RBI's decision to maintain policy rates
Mumbai, April 7
India Inc on Tuesday expressed
its disappointment over the Reserve Bank of India's (RBI) decision to
maintain its policy rates unchanged in its first monetary review for the
2015-16 fiscal.
Industry chamber Federation of Indian Chambers
of Commerce and Industry (FICCI) said it was hoping for a continuation
of the rate cut cycle by the RBI in its first monetary policy review for
2015-16.
"Of greater concern to industry is the fact that the
transmission of the rate cuts introduced earlier by the RBI has not
happened at the level of the banks," said Jyotsna Suri, FICCI president.
Suri pointed that the decision of RBI to examine and issue
guidelines for remuneration of non-executive directors, other than
part-time chairman, of banks is a welcome move.
Commenting on the
First bi-monthly monetary policy review of the current fiscal,
Confederation of Indian Industry (CII) President Ajay S. Shriram said
the RBI decision reflects a very cautious approach towards anchoring
inflationary expectations.
Shriram pointed out that the RBI had
enough space to cut rates given the fact that there has been a drastic
decline in crude oil and commodity prices.
"A cut in policy rates
even by a modest 25 basis points would have been a mood elevator and
propelled industry and consumers to augment demand," said Shriram.
"This
is especially required to provide a fillip to growth in the
employment-intensive auto, consumer durables and housing industry,"
Shriram added.
Industry lobby PHD Chamber of Commerce and Industry, too, expressed its disappointment at the status quo maintained by RBI.
"Industry
is facing a tough environment as the demand is decelerating and costs
of doing businesses are rising," said Alok B. Shriram, president, PHD
Chamber of Commerce and Industry.
"There must be transmission by the banks of the front loaded repo rate cut by RBI to the lending rates," added Shriram.
ICICI
Bank's chief executive and managing director Chanda Kochhar said the
policy statement has articulated confidence in the economic scenario and
the positive direction in which the economy is moving.
"There
are a number of positive policy measures, such as enhancing retail
investor access to the g-sec market, permitting Indian companies to
issue rupee bonds overseas and permitting market-linked compensation for
non-executive directors of banks," Kochhar added.
Meanwhile,
Debopam Chaudhuri, chief economist of ZyFin Research said the status quo
by the RBI was on expected lines with minimal monetary transmission
since the last repo cuts and weather disturbances.
"We expect
credit offtake to rise as consumer demand picks up in the economy
ensuring a better transmission of RBI's policy moves going forward. We
expect repo to come down by 50 bps in the current fiscal,†Chaudhuri
added.
RBI Governor Raghuram Rajan, who conducted the first
bi-monthly review of the monetary policy for the current fiscal year,
decided to retain the repurchase rate, the reverse repurchase rate, the
cash reserve ratio and the statutory ratio at existing levels.
He
also projected a 7.8 percent growth for the current fiscal year,
subject to a normal monsoon -- over which the RBI was worried -- as also
an inflation rate of 5.8 percent by the end of the year, after easing
to around 4 percent by August.
Rajan said the Reserve Bank
adopted an accommodative policy stance since January, ensuring
comfortable liquidity in the system. "Going forward, the accommodative
stance of monetary policy will be maintained, but monetary policy
actions will be conditioned by incoming data."
Accordingly, the
repurchase rate and reserve repurchase rate have been maintained at 7.5
percent and 6.5 percent, respectively, while the cash reserve ratio and
the statutory liquidity ratio have been left untouched at 4 percent and
21.5 percent, respectively.