Hailing Reserve Bank of India's (RBI) decision to cut key rates, Planning Commission has said that it would boost investments and hoped the measures will have a significant effect on long term borrowing rates. India Inc, which is reeling under slowdown too has hailed the RBI’s move to reduce repo rate and CRR by a quarter per cent, saying that it will spur growth and ease the prevailing tight liquidity condition.
As per the Planning Commission Deputy Chairman Montek Singh Ahluwalia, ‘the cash reserve ratio (CRR) cut will be welcomed by the markets because it will essentially create more resources for the banks to lend. I think this is the right thing to do at this point given that we feel that economy is beginning to bottom out.’ He further stated that “I think what it signals is that RBI feels that looking ahead the government has taken many steps which give the fiscal space needed for monetary policy to support growth.”
The central bank slashed its key repo rate by 25 bps to 7.75% and in a surprise move also reduced the cash reserve ratio (CRR) of scheduled banks by 25 bps to 4%, a move that would infuse Rs 18,000 crore in system from February 9. The apex bank also reduced short-term lending and borrowing rates by 0.25 percent to 7.75% and 6.75% respectively.
By adding further Ahluwalia said the government has taken steps to create fiscal room. We are taking steps to revive investment. We need to move to a growth supporting policy since the macro economic worries are better controlled. I think that RBI has endorsed that.
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