India Inc hails pause in RBI's monetary tightening drive | business | Hindustan Times
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India Inc hails pause in RBI's monetary tightening drive

business Updated: Dec 16, 2011 17:14 IST

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Industry on Friday welcomed the RBI's move to keep key policy rates unchanged in its monetary policy review and said the central bank's commitment to address the slowdown in growth in future actions was reassuring.

"The RBI's guidance that monetary policy actions from now on will respond to the slowdown in growth is reassuring," CII Director General Chandrajit Banerjee said.

However, he asserted that the policy does not reflect the urgency of the situation, with industrial growth contracting and the investment outlook subdued.

"Given that the need for improving sentiments and to stimulate growth is urgent, the RBI could have used the current opportunity to send strong signals that growth will not be sacrificed further even while inflation is being controlled. In any case, inflation has started to soften, which is most welcome," Banerjee said.

In its policy review today, the central bank maintained the repo rate (at which banks borrow from the RBI) at 8.5 % and the reverse repo rate (at which the RBI borrows from banks) at 7.5 %.

The halt in the RBI's monetary tightening drive comes after 13 hikes since March, 2010.

The RBI has also decided to retain the cash reserve ratio (CRR), the amount banks need to park with the RBI, at 6 %. The industry was expecting a marginal cut in the CRR to induce liquidity in the system and promote investment.