India Inc on Friday said it is looking forward to repo rate cut in future as cost of funds has to come down in coming times, but expect continuation of accommodative policy stance by Reserve Bank of India (RBI). RBI decided to leave the benchmark interest rate unchanged at 4 per cent, but maintained an accommodative stance as the economy faces the brunt of the second COVID wave.
Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry said that the RBI has maintained an accommodative stance as long as necessary to revive and sustain growth on a durable basis and to continue to mitigate impact of COVID-19 and keep inflation within the target.
"We look forward to possible repo rate cut in future as cost of funds has to come down in coming times. We expect continuation of accommodative policy stance as depressed demand has to be rejuvenated with enhanced liquidity for businesses and people," Aggarwal said. He added that due to the current pace of vaccination and demand recovery, the normal growth curve would take time.
Assocham said that the RBI's decision sends an important message from the central bank to be reaching out to those affected the most by COVID-19 pandemic, through increased and wider windows for soft lendings.
"While keeping the benchmark repo rates unchanged at 4 per cent was on the expected lines, extension of Rs 15,000 crore special liquidity window for contact-intensive sectors would help job-oriented sectors, particularly amongst micro, small and medium enterprises (MSMEs)," it said.
It added that another window of Rs 16,000 crore for MSMEs through SIDBI would enable financial institutions to reach out to the smaller business entities in this hour of difficulty.
"The RBI's macro projections of 9.5 per cent growth and retail inflation of 5. 1 per cent for FY22 are in line with the current situation marked by calibrated opening of the economy, to be helped by increasing penetration of vaccination and the ensuing uptick in the rural demand," Assocham said.
CII said that while keeping the policy rates unchanged, RBI's move to continue to use its unconventional tools to keep yields stable amid a large government borrowing program provides succour to keep the borrowing costs contained for the private sector.
"Measures such as provision of on-tap liquidity window worth Rs 15,000 crore for contact - intensive sectors, special liquidity facility to SIDBI for on-lending and refinancing and expanding coverage of borrowers under Resolution Framework 2. 0 are all expected to provide relief to the beleaguered sectors," the chamber added.