Will RBI's Rajan cut interest rates tomorrow?
Many believe that it is time for RBI to look at Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to get it's point home. It is believed that bringing down CRR by 50 basis points will inject Rs 40,000 crore in the Indian market which may ease pressure on lending rates.
Will Reserve Bank of India (RBI) go for the third rate cut of this year or will he pause to take sense of the situation before taking yet another plunge?
RBI has reduced repo rate twice in the current calendar year in order to stimulate growth but banks have spoiled the party by keeping lending rates unchanged. Clearly, more rate cuts aren't a solution and the RBI must find a way to make sure that banks reduce lending rates.
Many believe that it is time for RBI to look at Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to get it's point home. It is believed that bringing down CRR by 50 basis points will inject Rs 40,000 crore in the Indian market which may ease pressure on lending rates.
RBI has cut repo rate twice (25 basis points each) this year, from 8% to 7.5%, currently but this has failed to have an impact.
Also Read: Should Raghuram Rajan cut repo rate again tomorrow?
In his subsequent policy review, RBI did bring down SLR freeing up money with banks but retail loan rates continue to be high.
Given the recent upswing in food inflation and a possibility of high food prices because of sudden rains, RBI is most likely to maintain status quo on repo rate.
Also Read: Unseasonal rains to push CPI inflation to 6% next quarter: Nomura
Although, an effort to bring down interest rates through other means might just be tried.