Industry chambers expressed concern on the hike in cash reserve ratio (CRR) by 50 basis points announced by the Reserve Bank of India today. Barring this aspect, the chambers stated the policy to be in line with expectations.The associations said the hike in CRR will lead to credit squeeze, especially for micro, small and medium enterprises, since effective rates and availability of bank credit are an issue for them."If a hike had become unavoidable, the banks should have been paid interest on the money parked with the RBI so that the pressure on banks to increase interest rates to the consumer is lower," said Habil Khorakiwala, president, Federation of Indian Chamber of Commerce and Industry (FICCI).The Confederation of Indian Industry (CII) is of the view that with high inflow of foreign capital into the economy, and the liquidity situation being healthy, the removal of the cap of Rs 3,000 crore on daily reverse repo would help manage volatility in call money rates, and additionally suck out excess liquidity. According to the Associated Chambers of Commerce and Industry of India (Assocham), liquidity which is not the concern of Indian industry now may be a problem in future due to enhancement of CRR. The industry lobby, however, appreciated the unchanged repo, reverse repo and bank rates."The overall stance of the policy, to ensure a monetary and interest rate environment that supports exports and investment demand in the economy, to enable continuation of growth momentum, is welcomed," said Sanjay Bhatia, president, PHD Chamber of Commerce and Industry.
