Industry disappointed at RBI's monetary stance

28 January 2009

RBI's monetary policy announced yesterday, which left key rates unchanged has left the industry disappointed. Though most polls said that a rate cut was not expected, economist, bankers and industry policies have expressed their stand against the conservative wait and watch policy adopted by the RBI.

The central bank left its repo rate, reverse repo rate and the cash reserve ratio unchanged on Tuesday, RBI assured market participants that it will endeavour to maintain the overnight money market rates within limits.

''The Reserve Bank will continue to pursue this stance of ensuring ample liquidity in the market and maintaining the overnight money market rates within the LAF corridor,'' it said in a release, adding, ''In order to do so, the Reserve Bank will, as in the past, employ both conventional and unconventional measures.''

The demand for credit from the banking sector has increased as other sources of funds have shrunk, the release noted.

Industry expresses disappointment
Welcoming the extension of bank's refinancing facilities to mutual funds, non-finance banking and housing companies by relaxing maintenance of SLR upto 1.5 per cent, ASSOCHAM said that it was expecting that the premier bank would have also brought down cash reserve ratio, repo rate and reverse repo rate by at least 100 basis points, which did not happen.

ASSOCHAM president, Sajjan Jindal said in a statement that the need of hour is that Indian Inc. needed money at relaxed interest rates which could have been possible provided RBI had not maintained status quo in its cash reserve ratio, reverse repo rate and repo rate.