RBI mid-quarter review on Thursday, banks don't expect rate cut
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Banks don't see RBI cutting rate

After having already cut cash reserve ratio(CRR) by 0.75 per centage points last week, bankers feel the Reserve Bank of India (RBI) may not do much with regard to cutting interest rate in its mid-quarterly review of monetary policy.

  • Mumbai,  March 15, 2012  
  • |  
  • UPDATED   09:13 IST

After having already cut cash reserve ratio (CRR) by 0.75 per centage points last week, bankers feel the Reserve Bank of India (RBI) may not do much with regard to cutting interest rate in its mid-quarterly review of monetary policy on Thursday. The possibility of key policy rate cut is not bright as industrial output grew by 6.8 per cent in January against just 2.5 per cent in the previous month.

Financial markets and industries are although hoping for a rate cut in the Reserve Bank of India's mid-quarter review of its monetary policy.

"We expect the RBI to have some surprises installed when it comes out with the third quarter monetary review on March 15. This could also be a repo rate cut," Soumyakanti Ghosh, director, economics and research, Federation of Indian Chambers of Commerce and Industry (FICCI).

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Ghosh's views were echoed by the Confederation of Indian Industry's (CII) Director General, Chandrahit Banerjee, who urged the RBI to cut the key lending rate, also known as repo rate, which he said has the potential to boost economic activity in the country.

"CII would recommend that the RBI should go ahead and cut the repo rate in the March review by 50 to 100 basis points, given that inflation has moderated over the last two months," Banerjee said.

The central bank last week had freed more money for commercial banks to lend by cutting a key rate that determines the amount of funds such institutions have to compulsorily hold as cash against their deposits.

The move will release additional liquidity of Rs.480 billion into the system, the apex bank had said.

With IANS inputs