India Inc wants rate cut: Unhappy with the RBI’s decision to keep policy rate unchanged, India Inc on Tuesday said banks must immediately pass on the benefit of earlier rate cuts to borrowers to kickstart growth and stimulate investment. RBI lowered interest rates by a total of 0.50 percent since January 2015, but banks are yet to pass on the benefit to borrowers. “With the RBI choosing not to reduce the policy interest rate, demand revival in the economy and pick up in the investment cycle would remain a tall order”. “The ball is clearly in the court of the banks to rise to the occasion since credit off-take has remained weak despite front loading of the two rate cuts,” Assocham President Rana Kapoor said. Reserve Bank Governor Raghuram Rajan today kept policy rate unchanged awaiting clarity on impact of unseasonal rains on food inflation even as he wanted banks to pass on benefits of previous two rate cuts. “Industry is facing a tough environment as the demand is decelerating and costs of doing businesses are rising,” PHD Chamber President Alok B Shriram said. “There must be transmission by the banks of the front loaded repo rate cut by RBI to the lending rates,” he added. The repo rate, at which RBI lends to the banking system, will continue to be at 7.5 percent and the cash reserve ratio, which is the amount of deposits parked with the central bank, will remain at 4 percent . “A cut in policy rates even by a modest 25 basis points would have been a mood elevator and propelled industry and consumers to augment demand. 02:02pm Market Check The market trimmed losses supported by Reliance Industries. The Sensex dropped 86.94 points to 28417.52 and the Nifty declined 38.55 points to 8621.35. About 1404 shares have advanced, 1204 shares declined, and 162 shares are unchanged on the BSE. The Reserve Bank of India left key policy rates unchanged today. It expects inflation to cool down to 4 percent by August but firm up again to 5.8 percent by year-end. The central bank says they will look through seasonal and base effect for inflation. The Reserve Bank has estimated FY16 GDP at 7.8 percent, 30 basis points more than the CSO expectation. RBI Governor, Raghuram Rajan says there is more room to cut interest rates but will watch out for data, adding that banks over time will be forced to match markets and bring down rates. The governor also says that US Fed’s policy changes will not constrain RBI’s move on rates. The rupee weakened marginally to 62.37 a dollar against a close of 62.18 in previous session on account of fresh demand for the dollar from importers and weakness in the equity markets. Global markets like Shanghai and Nikkei closed with handsome gains today, up 1-2.5 percent while European markets gained more than 1 percent. In positive macro data, UK Services PMI jumped to 58.9 in March against 56.7 in February.
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