'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
Chairman Pratip Chaudhuri, last week, India
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
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
"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