New Delhi: After RBI took the overnight lending repo rates to a fou-year high of 7.50 per cent with its quarterly hike of 0.25 per cent, industry chambers expect interest rates to harden slightly.

ASSOCHAM President Venugopal Dhoot thinks the hike in repo rate will eventually raise the cost of borrowings with interest rates slightly moving upward and says that RBI should have maintained the status quo in repo rate too.

FICCI shares a similar position and says the move would have an indirect impact on the lending rate which off late has been hardening.

The chamber says industry should have access to bank funds at globally competitive rates as the ever-increasing lending rates have all the more adverse impact on small and medium enterprises who do not have any other recourse to fund their expansion plans, it added.

CII terms the policy "pragmatic" and its president R Seshasayee, said the 25-basis points increase in the repo rate has sent a strong signal of RBI's hawkish position on combating inflation.

"In the given situation of liquidity, the rise in repo rate would have the desired impact and help reduce headline inflation, hovering around 6 per cent," he said.

Sanjay Bhatia, president, PHDCCI, said that in recent times banks have revised the PLR to keep the spread between deposit and lending rates intact and therefore, the hike in repo rate should have been avoided.

The apex bank also raised the provisioning requirement by one per cent to two per cent for real estate, personal loans (excluding housing), capital market exposure and against credit cards. This means that banks will now have to keep two paise for risk provisioning against every rupee loan to these four sectors.

Seshasayee is happy that the residential housing sector has been kept out of this ambit, since the country requires massive investments in this area. He added, the RBI wanted to
ensure that inflation and inflationary expectations are addressed adequately, while the growth momentum is retained.

On RBI's revision of its projection for the economy's growth to 8.5-9 per cent from 8 per cent earlier and the economic growth figures for 2005-06 revised to nine per cent from 8.5 per cent estimated earlier that India is "on the verge of moving to the next level of growth trajectory," ha added.

Deepak Pahwa, president, Indo-American Chamber of Commerce was of the view that interest rates should come down to make the cost of capital internationally competitive.
Consequently, a proactive tooling of the macro and monetary policies and downward revision of all variables that pushes up the cost was required.

Federation of Indian Export Organisation's president Ganesh Kumar Gupta held the view that export credit, still above the rate at which credit is available to our competitors, should not be affected, as this would further add to the transaction cost of exporters.