New Delhi: Increase in policy interest rates by 40 basis points ,coupled with a 50 bps hike in the Cash Reserve Ratio by RBI, is a pointer for hardening of the lending rates by the banks amidst challenging global head winds in the form of high inflation and supply disruptions, said ASSOCHAM Secretary General Deepak Sood.
” While we were expecting the reversal of accommodative interest rate cycle from June in phases, the decision of the RBI Monetary Policy Committee to advance the withdrawal of the pandemic-related accommodation have become inevitable in the face of a fast -changing geo-political situation, volatility in crude oil prices and a high level of global inflation not seen in over four decades in large economies like the US,” said Sood.
He said, in the face of increasing input costs, the rising credit cost would add to the challenges for the corporates in terms of their pricing power. However, in the medium to long term, a moderation of the inflation rates should lead to a revival in demand and, as RBI Governor Shaktikanta Das emphasised, lead to sustainable growth.
The ASSOCHAM expects the banks to take a holistic view of the RBI decision and tweak rates in a manner that would not lead to distress to the corporate balance sheets, particularly those in the small and medium sector.
”The decision of the RBI Monetary Policy Committee to reverse the accommodative cycle and raise interest rates is a remedy to tame inflation. We expect it not to be a bitter pill but a moderate medicine to fight the price rise”, Sood said .
