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October 30, 2007 18:53 IST
Industry chambers said on Tuesday the RBI mid-term credit policy should not have opted for reducing benchmark interest rates to trigger higher economic growth.
The chambers also said RBI's move to increase the requirements for banks to keep 0.5 per cent more cash with the central bank would not allow reduction in interest rates, though they may not rise as well.
The Reserve Bank today raised Cash Reserve Ratio -- proportion of bank deposits that they keep with the central bank -- by 0.5 per cent to 7.5 per cent for a fortnight from November 10. But it kept all benchmark interest rates unchanged.
"Keeping in mind the international trends in interest rates and particularly the indications coming in from the US, we feel that the RBI could have considered an interest rate (Repo Rate) cut to go along with the CRR hike of 50 bps," CII said.
Assocham President Venugopal Dhoot said bank rate should have been reduced as per requirements of the industry to arrest implications of slowdown in global economy and described the statement as giving more weightage to inflation.
Ficci said it hoped that the CRR increase would not impact lending rates, which are already at a high level.
"While we do appreciate RBI's predicament to control liquidity, any increase in lending rate would have a serious impact on the corporate profitability," it said.
Increase in CRR by 50 basis points will impound the bank liquidity and reduce the lendable resources of the banks, Ficci President Habil Khorakiwala said.
The Monetary and Credit Policy 2007-2008
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