The Reserve Bank of India (RBI), after a gap of 18 months, had reduced the Repo Rate by 25 basis points in February. A back-to-back cut in interest rate would provide ease to borrowers. It is expecting that the Reserve Bank of India (RBI) will cut rates for a 2nd consecutive time when its 3-day policy meeting finishes on Thursday.
The 6-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das who was appointed as the new RBI Governor in December, will announce the intention of the meeting at around Thursday noon.
Das has already carried meetings with stakeholders including industry bodies, MSME representatives, bankers, and depositors association. It would be the first bi-monthly monetary policy of this financial year (2019-20).
According to the rating firm ICRA, the RBI could go for a 25 bps rate cut in the current meeting of the monetary policy committee.
Industry Experts views
Industry and experts are assuming that the regulator of the banking sector to cut the key lending rate at which it lends to commercial banks by 0.25% with respect to increase the economic activities as doubts rise high about global economic slowdown which can impact India’s growth outlooks.
According to industry estimates, inflation is considerably below the RBI’s mandate of 4% and therefore it should cut the repo rate (the rate at which RBI lends to banks) to raise economic growth.
As per Director General of CII Chandrajit Banerjee, weaken in the growth in the 2nd half of 2018-19, it is requested that the RBI should reduce the Repo Rate by at least 25 basis points in the future policy and maintain a relieving course in monetary policy.
Banerjee further said that the rate cut should be transferred to banks effectively, a reduction in the cash reserve ratio (CRR) is also advised so that it enables banks cash for lending targets.
Softened performance of the manufacturing sector, particularly capital and consumer goods, had lowered the growth in industrial production to 1.7% in January from 7.5% a year ago.
Retail inflation based on the Consumer Price Index (CPI) continues to below 4%. It was 2.57% in February year-on-year.
Economists expect that the RBI should execute at least one more cut after this month’s meeting, which would take the repo rate to its lowest since 2010.
Inflation has continued below the RBI’s 4% target for 7-months and was expected to average 4.0% this financial year.
Pics Credit – ZEENEWS
