Others, however, felt that not cutting cash reserve ratio (CRR) indicated brilliant liquidity management. It means more funds will be free for private investors to borrow. Moves made in consonance with the Narasimham committee's second report on banking-sector restructuring also proved to be popular. Corporate experts termed them "bold".

Some were relieved that the policy, which mainly dealt with structural banking issues, had done nothing adverse for companies.

Confirmation that inflation was rising also appeared to be a general industry concern.

Haribhakti & Co partner Sailesh Haribhakti said: "The fact that CRR has not been cut is a pointer towards industrial recovery, and thegovernor has taken an important step by refraining from the cut."

He said the respect the policy accorded to the committee's second set of recommendations was a measure of Narasimham's technical input into the financial system.

Marico Industries' chief financial officer Milind Sarvate said: "Even as non-food credit has increased, I believe the index of business confidence is low. It is not clear how credit offtake, which means a higher investment by the corporate sector, has gone up. Basically, the policy deals with structural issues, and does not announce anything adverse for industry."

He noted the strong growth in money supply, and said the policy announcement reflected the rise in inflation rate from 4 per cent last year to around 8 per cent-plus.

Noted corporate lawyer Dinesh Vyas said: "The investment climate is not conducive, notwithstanding the 20 per cent rise in resources flow to the corporate sector. The policy does not have the strength to galvanise the financial system. You cannot blamethe finance ministry or the Reserve Bank, a psychological dullness prevails, which must be removed first."

Rallis India managing director Vijay Rai termed the policy as "average". Industry did not expect the RBI to announce anything major this time, he said. He noted that a growth in money supply indicated that inflation had taken place. "Deposits have increased because money has no other avenue to go," he said. "It cannot be put in stocks which are going down," he added.

The non-food credit improvement has been only in selective areas like steel, in which banks were forced to invest to rescue the sector, Rai said.

Company secretary Surinder Kanstiya said: If in future, companies are disallowed to lend in the overnight call market, the central bank will merely rob Peter to pay Paul. This will immediately lead to a virtual monopoly of banks. Corporate lending, though profit-oriented, was more accountable. This move is merely to appease banks."

Fieo president Ramu S Deora said the policy had given theright boost to export houses, first by retaining the interest rate on export finance at 9 per cent post- and pre-shipment, and fixing refinance to banks at 7 per cent. This has injected into the system liquidity of Rs 4,838 crore, compared with just about Rs 24 crore in the corresponding period last year. It means that credit has been increased because refinance rate is fixed at 7 per cent.

Deora feels export-credit refinance should be extended beyond March 1999 so that exporters can make their export programmes and commitments. Regarding Libor finance to exporters in dollars, small exporters, who are contributing 40 per cent to exports, are not equipped to avail themselves the facility because unless bankers arrange training programmes and seminars to educate them, this scheme cannot be successful

But Deora says unless attitudes are not changed at operational levels, the extra customer-service norms will not help. The only solution is to have accoutability, and cut down on paper work, he adds.

IndianMerchants Chamber called it a "technocratic policy" designed at giving a new depth to the banking and financial systems.

In a release issued in Mumbai, the chamber's president YP Trivedi cited the following features: The policy has respected the Narasimham committee's recommendations, it has exercised great restraint and withheld from either raising CRR or interest rates to curb inflation, and has shown great skill in handling the external sector.