Ludhiana, September 29, 2015: Shri Avtar Singh, President, Chamber of Industrial and Commercial Undertakings (CICU) & Shri Upkar Singh Ahuja, General Secretary, CICU in a joint press release today hailed the Repo Rate Cut announced by RBI.
The reduction in Repo Rate will further lead to reduction in finance cost for individuals and corporate. And thus, it will result in more buying capacity for commodities and consumables i.e. it will lead to reduction in the financing cost of Cars, Scooter, Capital Goods and Machinery which will ultimately strengthen the increase in production, business and boost the buying capacity of all consumers.
The Repo Rate is a tool to which RBI controls the money supply in the economy. Now, banks can borrow money at lower rates from RBI which means that they will lend it to trade and industry at a lower rate which leads a free cash to reinvest or take more loans to grow their business. With costs reduced this leads to better profitability in the future earnings potentials of the company.
At Micro level such a rate cut is positive sign for the entire economy. By cutting rates by 50 basis points, liquidity to the tune of Rs. 32000-40000 crores will be infused in banking sector. This additional money provides impetus to the business sector decreasing the money supply and promoting the manufacturing and service industry. Overall this increases the economic activities.
Rate cut lowers the cost of borrowing money from Banks. Individual and corporate saves thousands of crores and this money directly or indirectly is used for investing or spending, thereby increasing the GDP of our country. Increase in GDP will in turn strengthen the currency and arrest inflation. This is a driving force for growth and provides the conditions suitable for the growth of the economy.