Mixed reactions from Banks, Economists, India Inc on RBI Annual Policy Statement for the Year 2009-10

Federation of Indian Chambers of Commerce and Industry (FICCI): Given the lower rate of inflation with anticipation of a further decline, FICCI said this should have enabled the RBI to further prune repo rate and reverse repo rate. It said 100 basis point cut in Cash Reserve Ratio (CRR) would have injected more liquidity into the system, pushing banks to be more liberal in extending credit.

Associated Chambers of Commerce and Industry of India(ASSOCHAM): The corporate sector needed funds at liberal interest rates and had, therefore, expected the Central Bank to further reduce Cash Reserve Ratio, Reverse Repo Rate and Repo rate by 100 basis points each. It, however, welcomed the RBI's move to provide re-finance facilities to provide greater liquidity to mutual funds, Non Banking Finance Companies(NBFCs) and housing finance companies by relaxing maintenance of SLR up to 1.5 per cent.

The Confederation of Indian Industry (CII): The low inflation rate combined with the fact that there was no sign of reversal of the slowdown of the manufacturing sector should have compelled the RBI to adopt a more aggressive stance relating to monetary policy. The Confederation said many sectors were reeling under declining production and thus the review should have taken this into account.

Ashok Chawla, Economic Affairs Secretary, GOI: "The Reserve Bank has been monitoring the economic situation ... This (RBI's move) is reiteration of signals from the RBI to banks and credit markets," he said. Mr Chawla is expecting banks to cut lending rates in response to the RBI's move

Gaurav Kapur, Senior Economist, ABN Amro Bank: There is a substantial stock of liquidity already available, which will keep interest rates in check. He also points out that the money multiplier, which has gone up recently due to the cash reserve ratio (CRR) cuts, may remain stable in the future, as CRR is not expected to be cut to the same extent again, leading to lower growth in M3 in 2009-10.

Rajeev Malik, Economist, Macquarie Securities: Having cut aggressively the central bank will probably cut another 50 basis points at the most, but the economy will likely benefit from more aggressive lending rate cuts by banks that have been delayed.

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