'RBI unlikely to cut key rates in policy' | business | Hindustan Times
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'RBI unlikely to cut key rates in policy'

business Updated: Jan 18, 2009 11:42 IST
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With inflation declining sharply in recent weeks and slowing demand, the Reserve Bank may signal softer interest rates even though it may not tinker much with key-rates in the quarterly review of its annual monetary policy.

As Prime Minister Manmohan Singh himself indicated that the falling inflation has given monetary flexibility to deal with the difficult economic environment, RBI is widely expected to announce measures that would help the economy to push growth.

Bankers, however felt that the RBI may maintain a status quo in their key rates as the central bank has already brought down CRR and short-term rates to inject Rs 3-lakh crore liquidity in to the system.
After hiking its signalling rates till October last year, the apex bank started slashing its cash reserve ratio, repo and reverse repo rates to support growth.

The RBI reduced its CRR to 5 per cent, repo to 5.5 per cent and reverse repo to 4 per cent.

CRR is the percentage of amount banks need to park with the Central bank, repo is the rate at which the RBI lends to banks and reverse repo is the rate at which the apex bank accepts deposits from banks.

"Presently, banks have surplus funds following the liquidity infusions by RBI. But the low-demand is causing supply-side issues to lenders. Given these factors, the RBI is unlikely to cut its rates further," IDBI Bank's Deputy Managing Director O V Bundellu said.