New Delhi: The reduction in the key policy rate by the RBI is expected to revive investment and encourage consumption, thereby kick-starting the sluggish economy, India Inc said on Friday.
Industry's reaction came as the central bank slashed its benchmark lending rate by 0.25 percentage points to 5.15 per cent.
The industry emphasised that it was now critical for banks to facilitate a faster transmission of rate cuts to ensure that the measures reap results.
CII Director General Chandrajit Banerjee said the cumulative 135 basis points rate cuts this year along with a slew of measures announced by the government to provide growth stimulus to a variety of sectors is expected to lift growth from its current stupor and unleash animal spirits.
The RBI's latest move to trim repo rate comes at a time when the economic growth has hit a six-year low of 5 per cent. This is the fifth straight rate cut by the central bank in as many policy reviews in 2019 and takes the total quantum of reductions to 1.35 per cent.
Exporters body FIEO's President Sharad Saraf, however, said the challenges in exports will continue and may aggravate with geopolitical situation.
Muthoot Pappachan Group CMD Thomas John Muthoot said for the common man to get the benefits of these cuts, it is important that banks ease the challenges for NBFCs to get funding from them, eventually pushing consumer sentiment.
Given the concerns on growth and inflation remaining within the target levels, a majority of analysts were expecting the RBI to cut rates at the policy review meeting.
The RBI's decision to cut the key policy rate by 25 basis points will boost consumer sentiment as well as housing sales during the ongoing festive season which is a crucial period for the realty sector, property consultants said on Friday.
However, they said the RBI should ensure effective transmission of rate cuts, announced on Friday as well as earlier, to home loan borrowers.
Auto industry body SIAM on Friday welcomed the RBI's lending rate cut and said the availability of cheaper finance along with the onset of the festive season will help generate better demand for vehicles.
Read more: Loans to become cheaper after RBI cuts interest rate to a decade low
