India First Edition

RBI cuts Repo Rate, SLR and CRR, CII Strongly Welcomes RBI Measures

Additional Liquidity Injection Using Multiple Channels Welcome: CII

Mitigating Systemic Risks in NBFCs and MFs Very Important: CII

Reserve Bank of India has today announced cut in cash reserve ratio, SLR and Repo Rate to inject more liquidity in the system.

Congratulating the RBI for displaying great agility, in announcing a slew of measures to inject liquidity, cut rates, manage the exchange rate and de risk the Mutual Fund and NBFC Sector, the CII Director General, Mr Chandrajit Banerjee said that the RBI’s measures endorse CII’s view that it is necessary to shift the policy mix to one that is supportive of growth. These are timely, coming on the back of a sharp increase in the overnight lending rates and serious concerns about the availability of credit at reasonable rates. We hope that banks will now follow the signal from the RBI and lower lending rates. Describing the RBI announcement as “timely”, the CII Director General said that at one go, the RBI has applied itself to the multiple issues of liquidity shortage, high cost of funds, depreciating rupee and systemic risks which face the Mutual Funds and the NBFC sector.

The CII release said that the steps taken by the RBI are in line with the recommendations made by CII. A reduction in the repo rate, a reduction in CRR and the liquidity support to mutual funds and NBFCs had been specifically recommended by CII. The special refinance facility for 90 days at the repo rate is especially welcome, said CII as it will ease liquidity at the slightly longer end. The reduction in SLR and the buy back of MSS securities are also welcome as they will release money held up in government securities, the release said.

CII has said that along with these measures, the RBI could also think of relaxing the restrictions on FII investment in the government debt market, so as to develop a new class of buyers for these securities.