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Wednesday, February 08, 2017  Expressing disappointment over belying of expectations on the interest rate cut by the Reserve Bank of India, the ASSOCHAM today said what is more worrying is the RBI putting an end to the “accommodative” stance in the wake of the impact of demonetization.

“The RBI, in a way, has put the ball in the court of the government for softening of the interest rates which, it said, would depend on how soon the problems of the bank non-performing assets (NPAs) , recapitalization of the lenders and re-caliberating of the small saving, are resolved….. The ASSOCHAM, therefore, would urge the government to take the signals from RBI seriously and address these issues.  Besides, there is a strong case for fiscal support, besides the monetary measures, to generate the consumer demand and revive the investment cycle,” ASSOCHAM President Mr. Sunil Kanoria said.

He said while inflation targeting remains an important mandate of the RBI’s Monetary Policy Committee, subdued growth should also weigh on the policy makers. “Besides the global factors, cited by the RBI, like firming of the crude oil and strengthening of dollar against rupee seem to have been given over-weight by the MPC. In fact, the crude oil at the present moment again appears to be easing”.

The ASSOCHAM, however, welcomed RBI Governor Dr Urjit Patel’s advice to the banks, saying there is still scope for further transmission despite no fresh cut in the Repo rate, based on the 175 basis points earlier reduction by the policy rates while the pass-on has been only half of that quantum.

Besides, the RBI stance of taking away the “accommodative” stance appears to be different from the signals from the government which has been assuring the industry and the people of subdued interest regime, going forward.

Mr Kanoria said after a helping hand from the Finance Minister Mr Arun Jaitley on the housing sector, granting infrastructure status to the affordable housing, the follow up action by the RBI has been put on the backburner. “To that extent, it is a letdown” for the key sector.

However, ASSOCHAM welcomed the RBI decision to set up a standing committee on cyber security, especially in the wake of increased focus on digitalization of the economy, post demonetization.

On the issue of NPAs, the chamber said, all the stake holders, including the banks, RBI and the government along with the industry need to work out pragmatic solutions.

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