<b>Credit Policy Review</b>: Hike to hit growth - FICCI

Expressing concern over the increase in short-term lending and borrowing rates by 0.25%, industry chamber FICCI today said the move could slow down the growth momentum of the country.

"The increase in repo and reverse repo rates, if translated into hike in interest rates, could prove to be a dampener in capital formation, employment generation and the overall growth of the economy," FICCI president Saroj Kumar Poddar told PTI.

In a move that may put pressure on housing and other consumer loans, Reserve Bank of India (RBI) today hiked its short-term lending and borrowing rates by 0.25%. The apex bank, however, kept unchanged the long-term rates at which it lends to commercial banks at 6% in the quartely review of the annual statement on Monetary Policy.

Poddar said the Reserve Bank should have waited for at least a year before taking any decision to hike short-term interest rates. "The economy is not overheated at this point. It is moving forward at a desirable pace. Perhaps this was not the correct time to hike the rates," Poddar said.

FICCI chief also said that interest rates are a strong signalling device and can control high inflation rates. "But the current inflation rates are not showing signs of any concern," he added.

He said that the move could render new projects unviable as they were planned taking into consideration the existing interest rates.