Bankers on Monday pitched for a rate cut from the Reserve Bank of India (RBI) in its first quarter monetary policy review on July 31, to revive demand amid an economic slowdown.
“Though liquidity is comfortable as of now, we have sought some money-supply measures and a pro-industry stance at the forthcoming monetary policy announcement considering the poor show by the economy in the recent months,” said Alok Kumar Misra, chairman and MD, Bank of India, who is also the chairman of the Indian Banks Association (IBA), after the customary pre-policy meeting with the RBI. “It could be a cut in the cash reserve ratio (CRR) or in the short-term lending rate (repo rate).”
After reducing policy rates by 0.50 percentage points in the annual monetary policy review in April, the RBI had maintained status quo in the mid-quarter review announced in June 2012. Bankers said the RBI expressed concerns about slow deposit and credit growth rates.
“A rate cut is not a panacea for all pains of the economy,” said Aditya Puri, MD, HDFC Bank. “At the current inflation rate I don’t see any room for the central bank to cut interest rates. While the RBI can do something to ease money supply, the government should do everything to ease supply-side bottlenecks.”
Bankers also discussed the rising stress levels in the system due to the increasing bad loans