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Mumbai - The financial market welcomed, Friday, India's central bank, Reserve Bank of India's (RBI) move of cutting cash reserve ratio (CRR or the proportion of deposits banks need to keep with the central bank) by 1 percentage point, saying it would release Rs.60,000 crore ($15 billion) into the banking system and ease the credit crunch that has roiled the domestic economy, but felt the central bank should do more.
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To stem the credit crunch crisis in the domestic market and inject liquidity into the market, RBI announced, Friday, that it would be cutting the CRR by 1 percent. Earlier, on Monday, the central bank had already announced a cut in the CRR by 50 basis points to 8.5 percent. The cuts will take effect from October 11.
According to apex industry chambers, the rate cut will ease the liquidity crunch but the central bank needs to do more to rescue the stricken market. "This would go a long way in injecting additional liquidity into the system, which is the need of the hour," said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).
The Federation of Indian Chamber of Commerce and Industry (FICCI) said the "confidence boosting" move will "inject the much desired liquidity in the system" and urged that other benchmark rates like repo rates should also be reduced.
Echoing the same view, Sajjan Jindal, president of the Associated Chambers of Commerce and Industry of India (ASSOCHAM), said, "It was high time that the central bank should also consider reducing the benchmark lending rate to ensure adequate liquidity in the system."
If this is not done infrastructure projects in the country would be severely affected, Jindal said.
Don't expect the expected from Dibakar Banerjee.
A top U.S. official on Monday urged India and other large emerging economies to ...
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