RBI policy fails to cheer India Inc

Calling it a "timid" policy, the Indian Merchants’ Chamber said the credit policy has sought to dodge the major economic challenges, instead of squarely facing them and providing remedial steps. "The policy has failed to address the basic problems such as widespread slowdown inindustrial production, sagging morale in the primary market and particularly the poor credit delivery system," IMC said.

Ram Gandhi, president IMC said the policy measures are not bold enough to meet the need of the time. "this is the time to stimulate demand in view of the low rate of inflation. The CRR and SLR should be reduced to put pressure on banks to improve the flow of credit delivery," he said.

On the other hand, welcoming the credit policy announced by the Reserve Bank today, the banking community said the policy laid stress on the cost of money and operational efficiency of banks. Taking the lead, Oriental Bank of Commerce (OBC) announced a one per cent cut in its prime lending ratio (PLR). Other banks including State Bank of India, Bank of Baroda and Bank of India and financial institutions are set to follow suit shortly.

OBC chairman Dalbir Singh said the bank has cut its PLR to 13 per cent with effect from May 1. Following RBI’s lowering of the minimum maturity for domestic term deposits,the bank has offered interest rate of five per cent for maturity ranging from 15 to 45 days, he said.

Bank of Baroda chairman K Kannan said the objective of the credit policy is to provide an impetus to the growth of the economy. "By announcing a one per cent cut in bank rate, the RBI indicates a need to move towards lower lending rates regime. Depending on the operational level of efficiency of banks, the PLR will move," he said.

"The present indication of Repo Rate at 6 per cent is a short term rate indicator while the Bank Rate at 9 per cent provides signal of medium term interest rates. They provide enough clue to the banks to manage their cost of deposits within the band of 6-9 per cent," he said.

Dena Bank Chairman, Ramesh Mishra said the policy is aimed at growth by curbing money supply and inflation. "The ground indications are to maintain liquidity and meet genuine requirements for funds," he said.

A certain section of the market also felt the credit policy had adopted a cautious approach andhad slowly unwound earlier measures initiated to curb the fluctuations in the forex market. Forex dealers also felt that forward dollar premiums were expected to crash following the announcement of the credit policy as most operators were unanimous in their opinion of a cut in CRR and fresh paying pressure emerged as players squared up positions and pushed up premiums from early lows. P Subramanyam, Executive Director of the Industrial Development Bank of India (IDBI) said the Governor should be congratulated on measures that curtail inflation and further deregulate interest rates.