Money & Banking

Credit policy evokes mixed reactions from chambers

Our Bureau Mumbai | Updated on November 09, 2017




The domestic industry has given mixed reactions to the policy rate hike announced by the RBI on Tuesday.

While industry chamber Assocham has called it a “calibrated” move to rein in inflation, CII and FICCI have expressed worry that rising lending rates may lead to a slowdown of investments.

“We appreciate the measured and balanced approach of RBI in containing inflation and moderating but not hampering growth. The bank loans will again see increased interest rates. The step will also move banks in increasing deposit rates to take care of the expanded credit demand. However there is a case for credit monitoring by RBI to pre-empt any surprises,” said Mr Dilip Modi, President, Assocham.

Though industry recognises that more measures by the central bank to tighten money supply may be on the anvil in order to control inflationary pressures, it is concerned about the detrimental effects of rising credit costs on industrial production.

FICCI concern

“FICCI expresses concern over the rate hike based on the recent sharp decline in industrial production to a low of 2.7 per cent. We are also concerned about successive hikes and tighter monetary policy which could hurt the growth prospects of industry. The most recent hike needs to be seen in context of the tight liquidity situation and this is bound to put pressure on banks to increase lending rates further. This would be a dampener for industrial growth especially in context of rise in raw material costs as well as fuel cost,” Dr Amit Mitra, Secretary General, FICCI.

Mr Chandrajit Banerjee, Director General, CII concurred: “CII is concerned that the RBI is setting the stage for a series of rate hikes that will have a negative impact on the investment momentum going forward. The persistent shortage of liquidity in the banking system has already raised expectations that interest rates will harden considerably in the coming year. RBI needs to take aggressive measures to ensure availability of funds for sustaining growth.”

Published on January 25, 2011

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