No. PR – 269
June 8, 2022
New Delhi
Withdrawal of accommodative policy stance by RBI disappointing: PHD Chamber
Increased cost of credit will have impact on ease of doing business and production possibilities
Hard landing from accommodative policy stance is disappointing as it will have an impact on costs of doing business and production possibilities, said Mr Pradeep Multani, President, PHD Chamber of Commerce and Industry.
In its 3rd Monetary Policy Statement of FY 2023, Reserve Bank of India’s MPC has decided to increase the policy repo rate by 50 bps to 4.90% and remain focused on withdrawal of accommodation so that inflation is maintained within the target while supporting growth.
Though RBI’s decision to raise the repo rate is in synchrony with its efforts to tackle persistently heightened inflation, however it will impact India’s economic growth due to dampened demand scenario and discouraged consumer and business sentiments, said Mr Pradeep Multani.
Any increase in the interest rate increases the costs of doing business, which are already high vis-a-vis high raw material costs amid geo-political distress, said Mr Pradeep Multani.
On the back of lingering geo-political distress, which has made the inflationary pressures broad based, largely driven by supply shocks, RBI has increased the CPI projection to 6.7% for FY2023 as compared to previous projection of 5.7%, with inflation remaining near upper tolerance of 6% for first three quarters of this year, said Mr Pradeep Multani.
It is encouraging to note that while the ongoing war is becoming a dampener for global trade and growth, Indian economy remains resilient with strong macroeconomic buffers. RBI has retained the GDP growth projections at 7.2% for FY2023, said Mr Pradeep Multani.
Giving a big boost to the housing sector, RBI has revised the limits on individual home loans, given by urban and rural co-operative banks, upwards by more than 100% taking into account the rise in housing prices over the last decade, said Mr Pradeep Multani.
Accordingly, the limits for Tier I /Tier II Primary (Urban) Co-operative Banks (UCBs) shall stand revised from ₹30 lakh/ ₹70 lakh to ₹60 lakh/ ₹140 lakh, respectively. As regards Rural Cooperative Banks (RCBs), the limits shall increase from ₹20 lakh to ₹50 lakh for RCBs with assessed net worth less than ₹100 crore; and from ₹30 lakh to ₹75 lakh for other RCBs.
It is highly appreciable that the RBI has permitted State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) to extend finance to Commercial Real Estate – Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5% of their total assets, said Mr Pradeep Multani.
These measures will enhance the flow of credit to the housing sectors and cater to the growing needs of affordable housing, said Mr Pradeep Multani.
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Warm Regards,
Media Division
PHD Chamber of Commerce and Industry