RBI's Rate Cut Will Help If Banks Pass On Benefits To Businesses: India Inc

The Reserve Bank of India (RBI) on Friday slashed the repo rate by 0.25 percentage point to 5.15 per cent - a level last seen in 2010. That marked the fifth straight reduction in the key lending rate so far this year. Industrialists said that the move would be helpful but only if the benefits are passed on to the businesses. This year alone the RBI has cut repo rates by 1.1 percentage point while banks have passed on an average of only 0.29 per cent to customers, they added.

"It will be somewhat helpful. But unfortunately all these repo rates are not being passed on by all the banks as they are facing difficulty. Government's saving rates are high and provident fund rates are also high," said Adi Godrej, Chairman, Godrej Group while speaking to NDTV.

Mahendra Singhi, CEO, Dalmia Bharat Group told NDTV, "The government should ensure that the interest cuts get passed on to the businesses and individuals. Secondly, more spending should be done by government in infrastructure so that the money comes in the market and rural economy gets a boost. That would revive the construction sector and more people would get jobs." 

Mr Singhi further added that the corporate tax cut announced last month was a welcome initiative and would impact industries in a positive way.

Anuj Puri, Chairman, ANAROCK Property Consultants said that the repo rate cut can probably go some way in improving consumer sentiments ahead of the festive season, which is a crucial quarter for the real estate sales.

"However, much depends on how efficiently banks transmit the benefits to their homebuying borrowers. An efficient transmission will lower the cost of capital not only for consumers but also for developers, making room for price revisions and further discounts. Some banks have agreed to link their lending rates to the repo rates, but all major lending institutions need to follow suit," he said.