Nirmala Sitharaman calls for 200 bps rate cut by RBI 25/08/2016

Nirmala Sitharaman calls for 200 bps rate cut by RBI
25/08/2016 13:12

According to media reports, Commerce and Industry Minister Nirmala Sitharaman has urged the Reserve Bank of India (RBI) to undertake a cut of interest rates of as much as 200 basis points or 2 per cent to bolster liquidity in the cash-strapped MSME sector, which is instrumental to the fortunes of Asia’s third biggest economy.
However, Sitharaman stopped short of specifying that the rate cut should be at one go or over a gradual time period.
“I still hold that the cost of credit in India is high. Undoubtedly, particularly MSMEs which create a lot of jobs contribute to exports... are all hard pressed for money and for them, approaching a bank is no solution because of the prevailing rate of interest. I have no hesitation to say, yes 200 bps, I would strongly recommend”, she said, the PTI reported. The RBI’s repo rate at present stands at 6.5 per cent, and the central bank has refrained from cutting its key interest rate since April amid high inflationary pressures.
The RBI will next meet on October 4, 2016, which will be the first policy meet for Urjit Patel as the central bank’s new governor who will replace Raghuram Rajam early next month.
Like Rajan, Patel is also seen as an inflation hawk, signaling little scope for a near-term rate cut with inflation above comfort levels.