ASSOCHAM cheers RBI's 50 bps CRR reduction

NEW DELHI: Apex trade body Associated Chambers of Commerce and Industry of India (ASSOCHAM), has cheered the Central Bank's move on the reduction of the cash reserve ratio (CRR) for banks by 50 basis points (bps) at the monetary policy review yesterday.

According to the trade lobby, the move will ease liquidity crisis and will drive a release of about Rs 32,000 crore and assist fund possible projects delayed due to a liquidity crunch.

Mr D S Rawat, secretary general, said, “The focus is now shifting from controlling inflation to restoring growth momentum as liquidity in the system tightens further. However the risk to inflation and inflation expectations continue to be high, forcing the RBI not to change key interest rates.”

The Central Bank's move is a major step to tame inflation and address concerns over economic growth which is expected to touch 7 per cent in 2011-12.

Besides addressing liquidity constraints, the move would also improve the sentiments. Notably, the Central Bank has left the interest rates unchanged at 8.5 percent at the monetary policy review for the second time in a row after it was raised 13 times between March 2010 and October 2011. The improvement in liquidity, enables banks to borrow less, which also leads to the improvement in lending ability.ASSOCHAM cheers RBI's 50 bps CRR reduction

Moreover, the reverse repo rate at which the RBI borrows money from banks was also kept unchanged at 7.5 percent during the third quarter review of the monetary policy.

The Central Bank has also depressed its prediction on GDP growth for the current fiscal to 7 per cent from 7.6 per cent.