The Indian industry on Thursday welcomed the rate-cut by the Reserve Bank of India and the accompanying accommodative stance. 

"The RBI policy decision to change the policy stance to 'accommodative' will simultaneously help the financial system to navigate to a lower term structure of interest rates and also accommodate growth concerns," said Rajnish Kumar, Chairman of SBI.

According to Assocham President B.K. Goenka: "The 25 basis points cut in the benchmark lending rate by the RBI is a welcome measure. Equally significant is that the central bank has shifted its stance from 'neutral' to 'accommodative'. These measures would rekindle economic growth and improve business sentiments." 

Ficci President Sandip Somany said: "We further hope that this third consecutive rate cut in repo rate will lead to effective transmission, encouraging banks to lower their lending rates for both retail and corporate credit. As of date, transmission has remained weak and ineffective largely due to tight liquidity conditions."

"Reviving business confidence, consumer confidence and triggering animal spirits in the economy is the need of the hour," added Somany.

Given that real interest rates in India are amongst the highest in the world, there is room for further reduction in repo rate. At the same time the RBI may also consider lowering the reverse repo rate to improve liquidity, he said.

Going forward, while RBI should continue the accommodative stance in coming months, the new Government should present a progressive Union Budget that would help revive consumption and encourage greater private investments, Somany added.

Published On : 06-06-2019

Source : Sme Times