The RBI’s decision on Tuesday to marginally cut key interest rates after a gap of nine months has brought only a slight relief to loan seekers, especially those from apparel industry getting working capital and term loans and people who want home loans.
During the third quarter monetary policy review on the day, RBI Governor D. Subbarao announced reduction in policy repo rate under liquidity adjustment facility (LAF) by 25 basis points from 8 per cent to 7.75 per cent with immediate effect.
Similarly, the reverse repo rate under LAF, determined with a spread of 100 basis points below the repo rate, was adjusted to 6.75 per cent, and marginal standing facility, determined with a spread of 100 basis points above the repo rate, stood adjusted to 8.75 per cent.
The Cash Reserve Ratio (CRR) of scheduled banks were brought down by 25 basis points to 4 per cent of their net demand and time liabilities, effecting from the fortnight beginning February 9, so as to inject more primary liquidity into the banking system.
S. Dhananjayan, a senior chartered accountant and industry consultant, told The Hindu that it was a pity that the RBI took nine months to realise the need of cutting the short-term bank rates, even as industrial growth was plummeting in the country, for supporting ‘growth by encouraging investment’.
“The CRR cut will only help the government machinery manage the widening current account deficit but will not end up helping the industrial sectors on a large scale,” he pointed out.
Exporters speak up
Though welcoming the rate cuts in general, Tirupur Exporters Association president A. Sakthivel said the industry was expecting at least 50 basis points cut in repo rate considering the financial crunch experienced in sectors like apparels.
The industrialists and home loan seekers are now looking keen on the commercial banks whether they will correspondingly cut the interest on the loans considering that the RBI has only marginally reduced the repo rates.