Industry bodies in the State have welcomed the Reserve Bank of India’s decision on Tuesday to cut the repo rate, the rate at which bank’s borrow funds from the central bank, by 0.25 percentage points.
K. Shiva Shanmugam, president, Federation of Karnataka Chambers of Commerce and Industry, said here that the move was “much needed” because industry had “fared miserably” in the recent months.
The easing of inflationary pressures had made the decision easier for the central bank, he noted.
Mr. Shanmugam said the decision to cut the cash reserve ratio (CRR), the minimum proportion of deposits that banks are required to keep with the central bank, would also inject more liquidity into the system.
M. Lakshminarayan, president, Bangalore Chamber of Industry and Commerce, said the reduction in the repo rate and the CRR would infuse fresh liquidity of the order of Rs. 18,000 crore and spur growth.
Any further reduction in the repo rate would be dependant on inflationary pressures in the future, Mr. Lakshminarayan added. He expressed the hope that lending rates would come down following the rate cut.