In the fifth bi-monthly monetary policy review of the current fiscal conducted by Reserve Bank of India Governor Raghuram Rajan said second quarter GDP numbers suggest that the economy is in early stages of recovery, the RBI Governor Raghuram Rajan said but retained his earlier growth projection for the current fiscal at 7.4 per cent. FICCI reacts on the RBI’s bimonthly policy as A.Didar Singh said Secretary General, FICCI “banks to pass on the full benefits in the form of lower lending rates for both consumers and investors”
on the basis of an assessment of the current and evolving macroeconomic situation, RBI has decided to:
- keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent;
- keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL);
- continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and
- continue with daily variable rate repos and reverse repos to smooth liquidity.Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent”
Soon after the monetary policy update, the sensitive index (Sensex) of the Bomay Stock Exchange and the Nifty of the National Stock Exchange (NSE) took a slight dip, but stabilised thereafter, as investors felt the pronouncements were on expected lines.
Reacting to RBI’s fifth bi-monthly monetary policy statement, 2015-16 announced earlier today, A Didar Singh, Secretary General, FICCI said “RBI has kept the policy rates unchanged. While this was expected, it is important to note the central bank’s observation on the transmission of the policy rate cuts announced till date. As mentioned, just about half of the policy repo rate reduction of 125 basis points has been transmitted by the banks till now. We would like banks to pass on the full benefits in the form of lower lending rates for both consumers and investors. This is important for revving up overall demand in the economy, which is still far from being robust. Of particular concern is the demand in the rural areas that has weakened on account of deficient monsoons.”
“GDP numbers released yesterday showed an uptick and we are in the early stages of recovery. However, for the growth momentum to be maintained and strengthen further, the investment cycle will have to be supported by all measures. The government has already taken the lead by front loading public investments and enhancing ease of doing business. A lower interest rate regime will fortify these efforts and support revival of domestic private investments” added Singh.