RBI deadbats credit policy

Posted On Wednesday, 25 January 2017 09:29

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Prevailing global negative sentiments forced the regulator, the Reserve Bank Of India (RBI) to keep all key rates unchanged. What it means for you and me is that interest rates will continue to remain remain in the higher regime for some more time.  What prompted the RBI not to make any more changes is  probably because the regulator is keen on knowing the impact of the actions taken recently.  The RBI had recently slashed the Cash Reserve Ratio (CRR) by 1.5%  and the repo rate by 1%.  It will be sometime before the impact of that action will be felt.

The question arising now is when will we be relieved from the burden of higher interest rates. The answer is that, in most likelihood, we will see interest rates softening rather than hardening. Most of the experts are buying  this view now. ""It is not necessary that the RBI can take action only on the policy day. So the RBI may swing into action  anytime the regulator feels it is necessary, said Harshvardhan Roongta, CEO, Apnaloan. In additon, it’s not just higher interest rates which are bothering the common man, but also  the job security. So until the overall situation improves, it is difficult to say that the confidence level of the retail consumers will see a come back, he added. More than a rate cut, the measures at this point are seen as a measure to rejuvenate the consumer confidence, Roongta pointed out. The Confederation of the Indian Industries (CII) views the RBI's move as ""the right step taken to give a boost to India's financial sector, so that it  remains stable and healthy.""  It further clarified that more measures are necessary like a cut in repo rate and CRR. It is interesting that the CII is giving a suggestion that  ""all bank deposits need to be guaranteed for a two-year period, to maintain depositor confidence in the banking sector"".  This seems to be a muchneeded action at this point of time. While the  Indian Merchants Chamber (IMC) expressed its displeasure by saying the policy failed to evoke cheer among the India Inc as the rates were kept unchanged. The reaction among Pune industrialists also reflected the same sentiments.

""The RBI should have taken more measures to inject additional liquidity into the system. We do not feel the crunch as most of the software companies are sufficiently funded, but other sectors are in great need of funding,” said Ganesh Natarajan, Vice Chairman and  MD, Zensar Technology. The bottomline really is that the common man has nothing to cheer about. The only pacifying note is the RBI's forecast of  domestic growth rate is at 7.5%  which indeed gives the indication that our economy is strong enough to sustain itself even while the rest of world is in financial turmoil.

News Source: Pune Mirror

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