Industry expects interest rates to harden following hike in repo rates

01 February 2007

New Delhi: After RBI took the overnight lending repo rates to a fou-year high of 7.50 per cent with its quarterly hike of 0.25 per cent, industry chambers expect interest rates to harden slightly.

ASSOCHAM President Venugopal Dhoot thinks the hike in repo rate will eventually raise the cost of borrowings with interest rates slightly moving upward and says that RBI should have maintained the status quo in repo rate too.

FICCI shares a similar position and says the move would have an indirect impact on the lending rate which off late has been hardening.

The chamber says industry should have access to bank funds at globally competitive rates as the ever-increasing lending rates have all the more adverse impact on small and medium enterprises who do not have any other recourse to fund their expansion plans, it added.

CII terms the policy "pragmatic" and its president R Seshasayee, said the 25-basis points increase in the repo rate has sent a strong signal of RBI's hawkish position on combating inflation.