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Don’t squeeze us often: India Inc
The RBI has tightened money supply to tame inflation, but India Inc fears that frequent interest rate hikes could squeeze credit and push up costs.
The RBI has tightened money supply to tame inflation, but India Inc fears that frequent interest rate hikes could squeeze credit and push up costs.
A higher repo rate would increase banks’ borrowing costs resulting in higher interest rates for final corporate and retail borrowers as banks try to protect margins.
Experts said a higher reverse repo rate would reduce the amount of funds available for industry to borrow from the pool of lendable resources.
As many as 40 per cent of respondents of a business confidence survey carried out by industry chamber FICCI this month identified high borrowing cost as an impediment to better performance.
“Going ahead this figure is expected to rise further,” Ficci said in a statement on Tuesday.
The realty sector, whose businesses are driven primarily by home loans, is understandably wary. “It will help the realty sector only if the current interest rates for retail loans are maintained,” Rohtas Goel, CMD, Omaxe Ltd said.
RBI Governor D. Subbarao said that banks have indicated that credit growth has picked up.
