Habil Khorakiwala Chairman, Wockhardt The 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.

Suresh Kotak President, Indian Merchants’ Chambers Constituents of the RBI’s 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.

R K Somany 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.

Arun Kapur 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 levels.

Harsh Goenka 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 don’t think the policy will impact the industry very much.

Nirmal Gangwal Managing director, Brescon Corporate Advisors CRR 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.

Milind Bhave Managing director, HDFC Mutual Fund It’s 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 Jalan’s reference that the Bank Rate will not be the only indication of the interest rate stance is a good sign. Also the RBI’s policy to closely monitor the inflation is creditable.

Saumitra Chaudhuri Economic 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 people’s courts, particularly the finance ministry.

Ajit Ranade Economist, ABN Amro This 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.