Repo rate cut ‘too little, too late’

The surprise move by RBI to reduce the short-term bank rates on Wednesday did not evoke much surprise in the capital intensive Tirupur industrial cluster as the entrepreneurs/technocrats here feel that the reduction was “too little and came too late.”

“Those in the industrial clusters like Tirpur have been telling for the past two years that the high interest rates on loans are a deterrent to credit offtake.

The apex bank did not listen to, and was more keen on tackling inflationary pressures. The damages has been done by then by way of drop in industrial production. In January, the repo rate has been reduced by 25 basis points after a gap of almost two years,” said S. Dhananjayan, a chartered accountant.

The industrialists said that the cut in repo rate in January did not get much translated into a reduction in interest rates.

“Many of the banks are quick to increase the interest rates when repo rate goes up but are not showing the same enthusiasm to reduce the rates corresponding to a cut in repo rates,” said G. R. Senthivel, exporter and secretary of Tirupur Exporters and Manufacturers Association.

A. Sakthivel, president of Tirupur Exporters Association, said that the minimum cut in repo rate was a minor relief to the exporters considering that the 3 per cent interest subvention on rupee packing credit was yet to be restored.