Saturday, January 26, 2013

'RBI may cut policy rate by at least 0.25 pc on Tuesday'

'RBI may cut policy rate by at least 0.25 pc on Tuesday'
The Reserve Bank is expected to

cut its policy rate by a minimum 0.25 per cent in its third

quarter review on Tuesday as there are increased concerns over

contracting industrial output and falling growth, bankers have


       Oriental Bank of Commerce Chairman and Managing Director

S L Bansal said, "We are expecting 25 basis points cut in repo

rate and Cash Reserve Ratio by similar percentage points".

     State Bank of India Chairman Pratip Chaudhuri, last week,

said, "CRR cut is more important and repo rate cut, if it

happens, will be very useful. 50 basis points (0.5 per cent)

repo rate cut would be useful. CRR, I would request for a

50-100 basis points cut".

       "Only then, the rate of interest environment can come down

significantly," he added.

       RBI in its last policy review had hinted at moderating its

policy rate in the January policy to stimulate growth.

       Earlier this week in Hong Kong, Finance Minister P

Chidambaram had said RBI must strike a balance between needs

of pushing growth and controlling inflation.

       Inflation based on wholesale prices declined to a three-

year low of 7.18 per cent in December. However, retail

inflation rose for the third successive month in December to

10.56 per cent.

       Industrial output contracted by 0.1 per cent in November.

The economy grew by 5.4 per cent in April-September this

fiscal, as against 7.3 per cent in the same period of 2011-12.

It is estimated that the year-end GDP would be 5.7 per cent, a

10-year low.

     ICICI Bank MD and CEO Chanda Kochhar, last week, also

said that RBI may lower its benchmark interest rates in the

coming months as inflation has eased, pursuant to which banks

may also lower their rates to some extent to pass on the

benefit to customers.

       "With inflation easing, I think that we would see policy

rate cuts in the coming months," Kochhar said.

     According to Punjab National Bank CMD K R Kamath, banks

would reduce interest rates if RBI cuts policy rates in the

coming policy.

       "If the rate of interest is reduced, probably the

transmission will happen. Bankers have already been saying

that transmission will happen if there is a rate cut," Kamath


       "While inflation concerns remain, growth is a bigger

concern ... so, while we understand the issues related to

inflation at this point of time, it was our recommendation

that there should be a rate cut so that growth comes first,"

HDFC Bank MD Aditya Puri said.

       RBI had last reduced short-term lending (repo) rate in

April, 2012 and stands at 8 per cent. In October, the RBI had

reduced cash reserve ratio (CRR) -- the portion of deposits

banks have to mandatorily park with the central bank -- by 25

basis points to 4.25 per cent

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