India Inc divided on rate hike

Corporate India was divided on the impact of RBI8217;s decision to hike short-term interest rates in its monetary policy review.

Corporate India was divided on the impact of RBI8217;s decision to hike short-term interest rates in its monetary policy review.

While analysts say any interest rate hike means higher cost of funds for corporates and for customers who buy their products, industry lobby group Confederation of Indian Industry CII described the quarterly review as 8216;8216;the most appropriate response to the current economic situation8217;8217;.

CII President R Seshasayee said though short-term floating rates of consumer credit are likely to go up and lead to temporary weakening of credit offtake, the hike in interest rates was unlikely to affect corporate borrowings and demand for long-term credit.

But Ficci and Assocham said that the RBI move to increase repo and reverse repo rates by 0.25 per cent could impede capital formation and economic growth.

FICCI President Saroj Poddar said the Reserve Bank should have waited for at least a year before taking any decision on hiking the short-term interest rates. 8216;8216;The economy is not overheated to the point. It is moving forward at a desirable pace. Perhaps this was not the correct time to hike the rates,8217;8217; Poddar said.

Assocham felt the revision of short-term rates would take a toll on economic growth. 8216;8216;Though GDP growth is led by a robust growth in investments, cost of money would have its impact on growth scenario, thus posing a possible risk to the vibrant economic growth,8217;8217; Assocham said.

BANKERS CAUTIOUS

8226; We can see competition increasing as banks expand their range of products and services, offering customers greater choice than ever before. RBI8217;s emphasis on credit quality, with stricter monitoring and appraisal, will further enhance the safety and soundness of the banking system.8212;O P Bhatt, Chairman, SBI

Story continues below this ad

8226; We continue to see strong genuine demand for credit from both the consumer and industrial sectors given the strong fundamentals of the economy and rising household incomes. Of course, as bankers we need to recognise the note of caution sounded by RBI given the global and domestic factors.8212;K V Kamath, CEO 038; MD, ICICI Bank

8226; Although bank deposits and credit have recorded strong growth during the first quarter, no hike in CRR appears to be an indication that the governor is comfortable with the liquidity situation.8212; Naina Lal Kidwai, CEO, HSBC