Policy on the expected lines : PHD Chamber

While reacting the overall stance of the Monetary Policy to ensure an interest rate environment that supports export and investment demand in the economy so as to enable continuation of growth momentum, Mr Sanjay Bhatia, President, PHD Chamber said the increase in CRR should have been avoided. Taking into consideration that inflation is under check, CRR is already high at 7% compared to target level of 3%. Since the credit off take is low, the increase in CRR may further impact the BPLR. He felt that increase in CRR may not have that desired impact on inflation.

Mr Bhatia welcomed keeping the bank rate, repo rate and reverse repo rate unchanged. The banks holding of Government securities at 30% against the statutory limit of 25% highlights that banks need to go for aggressive lending at soft rates. He said that RBI should impress upon the banking industry to reduce transaction cost and spread between deposit and lending rates. They should also pass on the benefit of recent reduction in deposit rates by 25-60 basis points to the industry by reducing lending rates. This is vital for sustaining the GDP growth of over 9%.

Mr Bhatia welcomed the measures taken on foreign exchange currency transactions allowing oil companies, importers and exporters to cover their foreign currency risks. He said that steps taken to permit authorised dealers to allow American options is a step towards full capital account convertibility.

He also welcomed that RBI's decision to urge the banking sector to draw time bound action plans for implementation of Core Banking System (CBS) across their branches as this will bring efficiency in the system and reduce the transaction cost for the industry as well as banking industry.

Imposition of a temporary ban on the banks who have gone over board to recover the dues will stop the banks from over reacting to the situation, he said.