Having expected cut in the policy rates, industry on Tuesday felt let down by the Reserve Bank which announced no step to bring down the interest costs even when low inflation offered an opportunity for an aggressive approach to stem economic downturn.

The apex business chambers said the RBI had a great opportunity to take steps for a lower interest regime, in the face of its own assessment of inflation going down by three per cent by March.

"We are disappointed that the central bank in its credit policy announcement has held back its activism in further pruning the repo and reveres repo rates at a time when, by its own admission, inflation was expected to moderate to three per cent by March," Federation of Indian Chambers of Commerce and Industry said.

Though the chambers welcomed the step taken by the apex bank to extend special refinance facilities to banks up to September 30 for providing liquidity support to meet the funding requirements of mutual funds, non-banking finance companies and housing finance companies by relaxing the maintenance of SLR up to 1.5 per cent.

The chamber asked the RBI to give a further signal to the banks, who still are risk averse.

Snapping a 10-week declining spree, inflation rose to 5.60 per cent for the week ended January 10.

The RBI, in its third quarter review, kept key policy rates and ratios unchanged.

Confederation of Indian Industry director general Chandrajit Banerjee said, "There is still no sign of reversal in the slowdown in the manufacturing sector, with many sectors experiencing a decline in production. This might have an impact on employment, unless fresh measures are taken to offset the decline in domestic demand".

The small scale sector is the most affected and it is indeed worrying that credit to small enterprises has fallen off sharply, Banerjee said.

Assocham president Sajjan Jindal said the demand creation and liquidity availability are still issues and would remain so until interest rates are further moderated.

Assocham concurs with RBI's assessment that India's GDP would not exceed seven per cent in the current fiscal in view of the global economic slowdown.

PHDCCI president Satish Bagrodia said industry, particularly the MSME sector, is continuing to experience difficulty in availing credit at reasonable cost from the banking sector.

"The gross bank credit to small, medium and large industry has declined from 26.7 per cent during 2006-07 to 25 per cent during 2007-08," he said.

The chamber asked the RBI to further bring down the cash reserve ratio by 50 basis points from the present five per cent.