The Hindu Business Line : Industry divided on impact

The CII supported the CRR hike by 0.25 percentage points stating it would help the Government bring down inflation as per the target. However, Assocham and the PHD Chamber of Commerce felt that the move would affect growth due to restricted availabili ty of credit by the banks to various sectors. “CII welcomes RBI’s decision to keep the bank rate, repo rate and the reverse repo rate unchanged in its Annual Policy Statement for the year 2008-09. CII is confident that CRR hike to suck out liquidity from the system will help RBI’s objective to bring down inflation to around 5.0 - 5.5 per cent without increasing interest rates at this point in time,” it said in a statement.

FICCI said that inflation was driven by global conditions and high food prices and hence an increase in interest rates would not have been effective in controlling inflation. “We are pleased that RBI this time has not used the interest rate hike to check the inflationary trend. The CRR hike that was announced a few days back in any case has squeezed a lot of liquidity from the system and with a further hike in CRR by 25 basis points, FICCI hopes that banks will not tamper with rates due to the CRR rate increase, said the FICCI President, Mr Rajeev Chandrasekhar. Assocham pointed out that the tightening money situation may lead to fall in business and consumer confidence. “As the current inflation is due to supply side constraints and global rise in commodity prices, hike in CRR is less likely to curtail the inflation rate,” said Mr Venugopal Dhoot, President, Assocham. PHD Chamber too expressed its concern saying the additional increase in CRR would take out over Rs 9,000 crore more from the banking system.

— Our Bureau

More Stories on : CRR & Bank Rates | Industry Associations | Credit Policy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page