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RBI’s rate cut move to encourage banks to lower lending rates: India Inc

08 Feb 2019 Evaluate

Cheering the Reserve Bank of India’s (RBI) move to bring down key interest rate by 25 basis points (bps), India Inc has expressed hopes that the move would encourage banks to lower lending rates, thereby stimulating consumption and investment demand to boost the country’s Gross Domestic Product (GDP) growth.

CII President Rakesh Bharti Mittal has stated that the 25 bps reduction in repo rate taken together with the shift in RBI's stance to 'neutral' from the earlier 'calibrated tightening, would go a long way in lifting sentiment among businesses. He noted that the rate cut is in the right direction, given that the inflation footprint has been benign for some time. According to him, the resumption of rate easing cycle, which is anticipated to bring down banks' lending rates, will provide a fillip to both consumption and investment demand.

As per Federation of Indian Chambers of Commerce and Industry (FICCI), which had hoped for a larger cut in repo rate, the 25 bps reduction will be followed up with more such measures in the subsequent months. FICCI President Sandip Somany stated that the monetary policy should complement the fiscal policy and strengthen the growth impulses slowly building in the economy. He also said “this is important as we do not foresee much impetus coming from external sources of growth as the global economy continues to show signs of moderation. In such a scenario, all levers must be used to strengthen India's domestic economy through greater consumption demand and investments.”

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