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April 29, 2002 | 1800 IST
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Industry unhappy as Jalan postpones bank rate cut

Reserve Bank of India Governor Bimal Jalan's Monetary and Credit Policy for 2002-03 failed to enthuse the industry.

The industry captains on Monday expressed disappointment at RBI's "cautious" move to postpone bank rate cut, but said the decision to reduce cash reserve ratio would facilitate credit flow to manufacturing sector.

"RBI has acted more in caution than the current low inflationary situation in the country warrants," Federation of Indian Chambers of Commerce and Industry president R S Lodha said pointing to RBI's decision to postpone rate cut.

Confederation of Indian Industry president Ashok Soota said the 0.5 per cent reduction in bank rate should have been carried out.

"Also disappointing is the inability to deregulate the savings rate and industry's expectations have been belied."

Welcoming the 0.5 per cent cut in CRR, Lodha said, "We hope the extra amount will translate into greater flow of funds to the manufacturing sector."

"The current economic situation in the country was characterised by lack of growth in demand, new investment was not picking up and unemployment rate was rising alarmingly. Therefore, a radical policy was needed," Associated Chambers of Commerce and Industry president K K Nohria said.

PHDCCI president Arun Kapur welcomed the lowering of interest rate on export credit in foreign currency and liberalising of facilities for the small- scale sector, and said, "There is a need to further improve credit delivery system and reduce cost of funds."

"No bank should be allowed to fix the spreads between cost of lending and borrowing under any circumstances to more than 2.0 per cent for any category of borrowers," Kapur said referring to the RBI directive to banks for announcing the spreads over prime lending rate to the public.

Federation of Indian Export Organisation vice-president S K Saraf said RBI's policy was one of "extreme caution" although the decision to cut export credit rate by 0.25 per cent was consistent with the underlying macroeconomic conditions.

The CII president also said that RBI should ask banks to improve credit delivery to the services sector.

The Monetary and Credit Policy 2002-2003
The Rediff Budget Special

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