New Delhi, Sep 29: Lauding the Reserve Bank's move to cut its short term lending rate by 50 basis points to 6.75 per cent, Indian industry on Tuesday called upon commercial banks to transmit the lower interest rate to borrowers.
"FICCI is looking forward to a faster transmission by banks as this would give a boost to the much needed investment and consumption demand in the economy," Federation of Indian Chambers of Commerce and Industry president Jyotsna Suri said in a statement here.
"We are equally encouraged by RBI's statement that the policy stance will continue to be accommodative and that it would work with the government to ensure that impediments to banks on passing on the policy rate cuts in the form of lower lending rates would be removed," she added.
Confederation of Indian Industry director general Chandrajit Banerjee said: "Exports from the country have been falling sharply, resulting in low capacity utilisation across sectors. In this scenario, investments cannot be expected to pick up without a significant reduction in interest rates."
"The corporate sector will now be in a better position to drive a recovery in investment and growth," he added.
Associated chambers of Commerce and Industry of India (Assocham) secretary general D.S.Rawat said RBI Governor Raghuram Rajan had delivered a Diwali bonus.
"As much as 125 bps interest rate cut has been announced since January this year. The ball is certainly in the court of the banks, which must now rise to the occasion," he said in a statement.
PHD Chamber of Commerce president Alok B.Shriram said: "To spur industrial growth, which is merely growing at a rate of 3.5 percent in April-July 2015-16 and enhance our exporters' competitiveness in the international markets, conducive policy environment becomes crucial."
"With CPI and WPI numbers very much within comfort zone and industrial growth not picking up, RBI's 50 bps cut in policy rate is a decisive pro-growth move and is welcome," he added.
Federation of Indian Export Organisations (FIEO) president SC Ralhan said immediate re-introduction of interest subvention for all sectors of exports will help exporters get credit at competitive rates to manage their competitiveness which has also been eroded due to steep depreciation of currencies.
Yes Bank chief executive Rana Kapoor said that amidst easing inflation and lowered growth projection, the reduction in policy rate will help reinforce the structural reforms of the government, allowing an investment-led job-creating revival in consumption demand.
Describing the RBI move as a "dovish delight", Abheek Barua, chief economist at HDFC Bank said: "Given the governor's guidance and the fact that he views the more aggressive 50 bps slash as a front-loading of policy easing it appears that today's (Tuesday) cut could be the last for the current financial year."
Kunal Shah, fund manager at Kotak Mahindra Old Mutual Life Insurance, said lower growth projections and lower inflationary pressures paved the way for aggressive easing.
"It's the first time RBI has come out with benchmark (1 year Treasury Bill) for arriving at real policy rates," Shah said in a statement.
In this connection, the RBI policy statement said: "Given our year-ahead projections of inflation, this ensures one year expected Treasury bill real interest rates of about 1.5-2.0 percent, which are appropriate for this stage of the recovery."
Urging RBI to immediately direct banks to cut their interest rates, the Confederation of All India Traders (CAIT) said banks' reduction of respective rates will make EMIs low and lower cost of borrowing, benefiting all sectors including real estate, automobiles and retail, among others.
"However, there is no change in CRR and SLR. Though now it is expected that interest rates will come down but liquidity crunch in the market is expected to continue," said CAIT secretary general Praveen Khandelwal.