COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Industry welcomes 'growth-oriented' credit policy

Trade and industry today welcomed the Reserve Bank of India's first-half monetary and credit policy, saying that the measures are growth-oriented.

R K Pitamber, president of the Bombay Chamber of Commerce and Industry, said the policy has provided for in-built flexibility, giving more opportunity to the RBI for making timely adjustments based on the emerging market conditions.

He, however, felt that the periodicity of such adjustments should be in line with global norms.

The business community in general has welcomed the reduction in the bank rate by one percentage point, as they hope this would help other lending rates to re-align with this base rate.

On the export front, the restoration of export credit refinance to 100 per cent as against the earlier 50 per cent, is a welcome measure which would help the export sector by way of increased finance. Also, the reduction in the interest rate on pre-shipment export credit and against incentives receivable from government cover by ECGC guarantee from 12 per cent to 11 per cent would help provide impetus to exports.

While the export sector will get some encouragement from the policy measures, they felt there is nothing in the policy to encourage infrastructure financing, which is a critical input for boosting investments and reviving the economy.

Bankers described the RBI's measures as positive and said the governor has given a new twist in his policy statement and deviated from the traditional approach. ''It was a policy statement this time rather than giving any specific measure for the bankers to adopt, '' said the chairman of a leading public sector bank.

He said the RBI had taken a right decision by keeping the Cash Reserve Ratio unchanged, since the banking system had enough liquidity to meet the demands of the industry, as well as exporters.

K Chakraborty, chief economist of Bank of Baroda, said the RBI's policy was good particularly in the absence of any direction such as the annual economic survey and the Union Budget. It was a broad framework under which banks were asked to chalk out their plan of action and survive, he said.

While the policy has given more freedom in bank operation, it has put a majority of the banks under the test of survival, particularly in asset-liability management, Chakraborty added.

UNI