New Delhi: The Reserve Bank of India’s decision to raise the cash reserve ratio (CRR) by an unexpected 75 basis points to 5.75 percent has invoked mixed reactions among the country’s leading bankers and industrialists. Following are the immediate responses of the key finance and business personalities on the CRR hike:
State Bank of India's Chairman, O P Bhatt:
"Today, there is so much liquidity in the system (that) it is distorting the interest rate curve and large corporates are able to raise funds at very low rates. I think what the RBI has done is excellent."
ICICI Bank MC and CEO Chanda Kochhar:
"I do not see any immediate impact on interest rates. There is so much liquidity (in the system)...Government borrowing is almost over and whatever is there, is there for investment," Kochhar told a news agency on the sidelines of World Economic Forum (WEF) meet here.
Bank of Baroda's Chief Economist Rupa Rege-Nitsure:
"The market was expecting a 0.50 percent hike in CRR -- I feel the 0.75 percent is slightly aggressive. It is more a pre-emptive move to control inflationary expectations."
Crisil's Director and Principal Economist DK Joshi:
"Today's move is a clear enunciation that inflation has emerged as a major concern for the RBI. This is clear from the fact that the apex bank hiked CRR by 0.75 per cent instead of by the widely-expected 0.50 percent."
Yes Bank's Chief Economist Shubhada Rao:
"Rate hikes would depend on the overall growth dynamics. The Reserve Bank has clearly said that it would continue to nurture growth while combating inflation."
FICCI president Harsh Pati Singhania:
"The tipping point has not yet arrived for tightening of the monetary policy and if one proceeds in that direction hastily, economic growth is bound to take a hit. This, in turn, will effect employment generation that is critical at this juncture."
Kotak Mahindra Bank's Head of retail liabilities KVS Manian:
"I would say that a slight upward pressure in short term lending rates can be expected. However, long term rates are unlikely to be affected in the near future unless credit growth picks up significantly."
ABN Amro’s Country Head, Meera Sanyal:
"The signal is that they (RBI) are clearly targeting inflation very strongly."
IDBI Bank Executive Director Sushil Munhot:
"I doubt if there would be a hike in interest rates immediately as there is enough liquidity in the system."
PHD Chamber of Commerce:
“The hike in CRR may adversely impact availability of funds with the banks for extending credit to the industry as the third quarter monetary policy move will drain out Rs 36,000 crore of liquidity from the banking system.”
V KUMARASWAMY, chief financial officer, JK Paper:
"As of today the banks are flush with funds and in the last few months there has not been too much of credit offtake. It is not likely (that rates will go up)."
HS BHARANA, chairman, Era Infra Engineering:
"I don't think there will be any impact. There is a lot of liquidity in the market. It is not going to affect lending rates."
Rajeev Talwar, group executive director, DLF Ltd:
"There will be no significant impact of CRR hike on the real estate sector. Banks will absorb its impact."
Venugopal Dhoot, chairman and MD, Videocon Ind:
"The consumer goods industry will welcome this as interest rates have not gone up. There is ample liquidity available in the system, even after the CRR hike. The rural market is growing and rural population has access to the banks. Since interest rates have not gone up and GDP projection has increased demand will continue to grow."
First Published: Friday, January 29, 2010, 16:29