Rediff.com« Back to articlePrint this article

India Inc looks forward to repo rate cut in future

June 04, 2021 22:55 IST

India Inc on Friday said it is looking forward to a repo rate cut in future as cost of funds has to come down in coming times, and expects continuation of accommodative policy stance by the Reserve Bank of India (RBI).

India Inc

Illustration: Uttam Ghosh/Rediff.com

The RBI decided to leave the benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, as the economy faces the brunt of the second COVID-19 wave.

Sanjay Aggarwal, president of PHD Chamber of Commerce and Industry, said the RBI has maintained an accommodative stance as long as necessary to revive and sustain growth on a durable basis and to mitigate impact of COVID-19, apart from an aim to keep inflation within the target.

 

"We look forward to possible repo rate cut in future as cost of funds has to come down in coming times.

"We expect continuation of an accommodative policy stance as depressed demand has to be rejuvenated with enhanced liquidity for businesses and people," Aggarwal said.

He added that due to the current pace of vaccination and demand recovery, the normal growth curve would take time.

Assocham said the RBI's decision sends an important message from the central bank to be reaching out to those affected the most by the COVID-19 pandemic, through increased and wider windows for soft lendings.

"While keeping the benchmark repo rates unchanged at 4 per cent was on the expected lines, extension of Rs 15,000 crore special liquidity window for contact-intensive sectors would help job-oriented sectors, particularly amongst micro, small and medium enterprises (MSMEs)," it said.

It added that another window of Rs 16,000 crore for MSMEs through SIDBI would enable financial institutions to reach out to the smaller business entities in this hour of difficulty.

"The RBI's macro projections of 9.5 per cent  growth and retail inflation of 5.1 per cent for FY22 are in line with the current situation marked by calibrated opening of the economy, to be helped by increasing penetration of vaccination and the ensuing uptick in the rural demand," Assocham said.

CII said that while keeping the policy rates unchanged, RBI's move to continue to use its unconventional tools to keep yields stable amid a large government borrowing program provides succour to keep the borrowing costs contained for the private sector.

"Measures such as provision of on-tap liquidity window worth Rs 15,000 crore for contact - intensive sectors, special liquidity facility to SIDBI for on-lending and refinancing and expanding coverage of borrowers under Resolution Framework 2.0 are all expected to provide relief to the beleaguered sectors," the chamber added.

Commenting on the RBI's monetary policy announcement, industry chamber FICCI said the central bank's consistency and approach towards managing the current challenges both economic and those on health front are laudable.

"The second wave has had a debilitating impact and in this hour of need, all levers must be pulled to support our MSMEs.

"The support given to the contact-based services like hotels/ restaurants/ tourism/ aviation ancillary services/ spas/ parlours through the Rs 15,000-crore separate liquidity window should provide some relief to the sector," it said.

In this time of the crisis, FICCI said, it would urge members of the banking fraternity to double up their efforts and support the corporate sector, including the MSMEs, across manufacturing and services.

© Copyright 2021 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.