India's central bank at its fourth bi-monthly monetary policy review on Tuesday has kept key policy interest rates unchanged. Dr Raghuram Rajan, Governor, Reserve Bank of India (RBI) has decided to keep repo and reverse repo rate at 8% and 7% respectively.
Meanwhile, cash reserve ratio and statutory liquidity ratio have also unchanged at 4% and 22% respectively. The RBI has decided to reduce the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from Oct 10, 2014.
A Didar Singh, Secretary General, FICCI said, "The policy is on expected lines as a rate cut was not on the cards. The Governor had made the RBI's position clear with regard to policy rates while addressing the FICCI-IBA Banking Conference recently. Although the upside risks to inflation have eased, the RBI has chosen to take a cautious stance given the geo-political risks that could have a bearing on oil prices and the lagged full impact of skewed rainfall which could impact food prices going ahead. Another element adding uncertainty to the future trajectory of inflation is the possible revision in administered prices which thus far has been held back."
"On the growth performance, FICCI feels that it is time for us to build on the good start seen in this year and firm up the performance of the industrial sector. Our surveys show that capacity utilization levels across sectors has not changed much over last six months. There will have to be a substantial improvement in demand for companies to undertake fresh investments. We feel that the de-bottlenecking process for projects initiated by the government has started yielding results and the full impact should be seen in the next six to twelve months," Singh added.
"As projects come on-stream and the industrial economy starts moving, there will hopefully be greater demand for credit. While we fully appreciate the measures taken by RBI in maintaining adequate liquidity in the system, I would like to mention that the viability of fresh investments is impacted by many factors including the cost of credit," said Singh.
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