RBI governor has a positive economic scenario at the time
of presenting this busy Credit Policy the inflation
well under control, booming forex reserve easy liquidity,
poor credit take-off in spite of a lower interest rate,
and the continuing slowdown in various global economies.
Looking at these factors, Dr Jalan should have taken a
bolder approach to kick-start the economy by reducing
the Bank Rate by a minimum of 1 per cent, keeping in mind
the lower interest regime in the global market.
Indian Merchants Chambers
Constituents of the RBIs Credit Policy are realistic
and growth inducing. Admittedly, the RBI has done its
best. Now it is for the government and the industry to
make the best use of various liberal measures announced
in the policy.
President, The Associated Chambers of Commerce and
Industry of India
In view of the tough global competition and comparatively
poor infrastructure, the industry was hoping for a reduction
of 0.50 per cent in the Bank Rate and the CRR for reinvigorating
the sluggish economy.
In spite of the existing low nominal interest rates, the
real interest rates in the economy are still high, and
also the credit off-take is low. Thus, though it is a
move in the right direction, the present reduction, both
in the Bank Rate and the CRR by 0.25 per cent, alone will
not have the desired effect. The proposal of the improved
credit delivery system is what the industry will be looking
at for removing the paradox between excess reserves with
banks and the lack of availability of funds.
President, The PHD Chamber of Commerce and Industry
Taking into consideration the poor rainfall in the country
and the RBI also revising the GDP rate downwards, the
policy should have reduced the Bank Rate at least by 1
per cent. The reduction of the Bank Rate by 0.25 per cent
will have almost negligible impact on the cost of funds,
which is still very high as compared to international
Chairman, RPG Enterprises
While the overall direction continues as before, the overall
impact will be minimal from this Credit Policy. The liquidity
position is already comfortable and the marginal drop
in the Bank Rate will not change it very much. While some
benefits have been introduced to boost exports, I dont
think the policy will impact the industry very much.
Managing director, Brescon Corporate Advisors
cuts and the reduction in Bank Rates have more or less
been a predictable phenomenon with each Credit Policy.
What is not changing is the credit comfort
level at the operating level in terms of reducing the
spread over PLRs being currently charged. This factor
has albeit been recognised by Jalan in his policy wherein
he has asked the banks to review their PLR and spreads.
This will ensure increased credit off take and make sure
the rate reduction is passed on.
However pressures of provisioning requirements, network
enhancement, technology up-gradation and VRS will put
further pressures on their spreads. To ensure compliance
with the above, a cosmetic reduction in their PLR may
be on the anvil but they would cover up the difference
in their spread. Frankly, today how many corporates are
able to draw funds at PLR?
While the governor needs to be commended for following
the promised route in terms of the targets set for reducing
CRR and the bank rates, the acid test remains as to the
transformations of these policies into action and ultimate
benefit to the credit user. The predictions of the inflation
rates remaining at 4 per cent and the GDP growth rates
at 5-5.5 per cent despite drought conditions, will no
doubt sustain the feel good factor, but the
ground realities as evinced by the earlier policies still
lag behind intentions.
Managing director, HDFC Mutual Fund
Its a positive Credit Policy and I believe the way
the central bank has managed the monetary policies in
the last two years, the present one is simply outstanding.
Dr Jalans reference that the Bank Rate will not
be the only indication of the interest rate stance is
a good sign. Also the RBIs policy to closely monitor
the inflation is creditable.
adviser, The Investment and Credit Rating Agency
The only thing that is surprising is the Bank Rate cut.
But it seems it is a psychological step. The RBI is making
a statement that a monetary policy cannot do very much
now and that the ball is very much in other peoples
courts, particularly the finance ministry.
Economist, ABN Amro
is the best the RBI governor could have done under the
circumstances. I think the ball is clearly in the other
court and it is for the government and the industry to
utilise this to their best advantage. From the RBI side,
they have done the best they could - it is like using
their last ammunition.