RBI Mid-Term Review addresses both growth, inflation: Industry

Mumbai, Oct 31 (UNI) Trade and industry leaders believe that the RBI's mid-term review of the Annual Credit Policy 2006-07 on the whole seems a very well thought out and appropriate response to the current market situation and addresses both growth and inflation concerns.

Mr Gautam Vir, MD&CEO, Development Credit Bank said: ''It is heartening to note that the clear stance taken by RBI in its Credit Policy 2006-07 is to ensure a monetary and interest rate environment which will support export as well as investment demand to ensure that the growth momentum already in place continues uninterrupted.'' Further, Mr Vir said this will thus make sure that the availability of resources at an appropriate rate to industry will continue to drive policy. It is thus heartening to note that all key rates like CRR, bank rate and SLR rate have been left unchanged and only the repo rate has marginally increased by 25 basis points reflecting the market realities that cost of money is heading up as demand for money outstrips the growth in deposits in the banking sector.

From an institutional framework point of view, the RBI has done well by giving banks in India an extra year preparation time for compliance with Basel II. While all banks and the regulator have been working towards this objective, any extra time will help banks get a full handle on tough issues like operational risk identification and measurement as well as fine tune the rating system for small and medium corporates.

Mr Neeraj Swaroop, Chief Executive Officer, Standard Chartered Bank said, ''Measures such as postponement of deadline for adoption of Basel II guidelines will ensure adequate preparedness of the banking system before migrating to the new system. Measures aimed at greater openness in capital account such as a higher limit for resident remittances overseas, increased portfolio investment limit in fixed income instruments, greater flexibility in borrowing overseas and the like are an indication of the growing comfort of the country on the external front.'' Mr Y M Deosthalee, Chief Financial Officer, Larsen&Toubro (L&T), said, ''The RBI policy is a reiteration of its monetary stance of ensuring the growth momentum with price stability. The hike in the repo rate by 25 basis points signals the possibility of liquidity tightening and a cautious wait and watch attitude by RBI.'' Mr Rakesh Mehta, Chairman, Mehta Equities Ltd said, ''By touching all time highs yesterday, markets have shrugged off all fears and doubts created by the furore in May about the Indian Economy. We expect markets to continue the existing trend even though short term hiccups cannot be ruled out. Sensex may touch 14000 before the Union Budget in February. Banking, Auto and Technology sectors should outperform other sectors during the period. Midcap stocks look very lucrative as they are far behind their peers in valuations.'' Indian Merchants' Chamber(IMC) President Nayan Patel said, ''Clearly, the policy displays cautious optimism. Fiscal and monetary measures have mitigated inflationary risks. Even then, there are reasons to be vigilant on this front, as inflationary expectations have remained firm because of elevated levels of internationally commodity prices and demand pressures visible in the expansion of money supply and reserve money.'' Mr Patel also welcomed the RBI's move doubling the permissible ceiling of ,000 to ,000 on remittance to foreign countries by resident Indians and permitted corporate borrowers to access ECB (external commercial borrowings) for additional 0 million with an average maturity period of 10 years.

Bombay Chamber of Commerce and Industry(BCCI) President Ashok Wadhwa welcomed the numerous forex policy relaxations announced by RBI Governor in the mid term review and termed it as ''in consonance'' with the CAC report II. He also added that much more guidelines and relaxations were required in the forex market especially in the area of interest rates and currency hedging rules etc, so as to prepare the Mumbai-centric forex market for its transition to RFC (Regional Financial Centres).

UNI SN MAZ AW2010