RBI Progress Resolve Banks Near Lending Charge - April 23, 2009

There is optimism in market that Reserve Bank of India''s cut in repo and reverse repo rates by 25 basis points each will pressurize financial institutions to slash interest rates to provide some relief. Mr Venugopal Dhoot, Chairman of Videocon Industries, said, "Although I welcome this move I expected a rate cut of 100 basis points. RBI must give same directions to other banks."

He said unless the commercial banks reduce interest rates, funding for projects and new ventures will not be easy.

The JSW Steel Vice-Chairman and Managing Director, Mr Sajjan Jindal, said repo and reverse repo rates should have been cut by 50 basis points, to bring down PLR to a single digit rate. "But I feel even 25 basis point cut, will send some signals to commercial banks to lower interest rates," he added.

Mr Pradeep Jain, Chairman, Parsvnath Developers Ltd, said the RBI has been taking all possible steps to infuse additional liquidity in the current cash-strapped market.

Since October last year, RBI has cut its short-term lending rate repo rate by 425 bps and reverse repo rate by 275 bps in different phases. "The RBI must also communicate to the PSU banks and financial institutions to lower the rate of interest further for providing loans to home buyers and companies as well," Mr Jain added.