FM hopes repo cut will spur investment

FM hopes repo cut will spur investment

New Delhi: Describing RBI’s move to cut its key short term rate, Repo, by one percentage point as beneficial for many sections, Finance Minister P Chidambaram on 20 October expressed the hope that the step would enthuse investors to see through their investment plans.

“The cut in repo rate will be beneficial for many sections of the people, especially borrowers as well as investors. This is our hope (it) will enthuse investors to continue to take forward their investment proposals," he told reporters immediately after the central bank announced a cut in the short-term lending rate to 8%.

He said the repo rate reduction is consistent with the objectives of moderating inflation as well as ensuring satisfactory growth rate.

This is the first cut in repo rate by the RBI since March 2004. In between, the RBI has been raising the rate to rein in inflation, which is still in double digits despite reduction.

Chidambaram described the RBI’s move as the part of the steps taken since 6 October. The RBI has since then cut the mandatory deposit requirements for banks, CRR, by 2.5% to inject Rs1 trillion into the cash-strapped system.

Besides, RBI is releasing a sum of Rs25,000 crore for banks, RRBs and cooperative lending institutions as the first installment against their outgo on the farm debt waiver scheme.

RBI is slated to come out with mid-term monetary review on 24 October.