RBI policy rate cuts below industry expectations

Industry today said the RBI measures towards lower interest rates will reduce the credit cost, but the central bank should have gone in for deeper cuts in policy rates in the face of the difficult business environment.   

"A deeper cut in repo and reverse repo rates by at least 50 basis points would have been appropriate, given the fact that the cost of credit is still high...," Confederation of Indian Industry Director-General Chandrajit Banerjee said.  

In its annual credit policy, the Reserve Bank announced 25 basis points cuts in both the short-term lending (repo) and the borrowing (reverse repo) rates giving a signal to banks to further reduce interest rates.   

While the industry welcomed the measure, it said the cut in the policy rates was below their expectations.   

"The corporate sector was expecting 50 basis points cut in the repo and reverse repo rates," Assocham President Sajjan Jindal said. He said the prime lending rates (PLR) of commercial banks should be brought down to a single-digit level.    

Despite repeated cuts in the interest rates since September 2008, the PLR of private-sector banks ranges between 12.7 per cent and 16.75 per cent, while for public-sector banks the lending rate is between 11.5 per cent and 13.5 per cent.