Amid slowdown concerns, the Reserve Bank of India’s Monetary Policy Committee headed by Governor Shaktikanta Das will shortly announce its bi-monthly policy decision. The key point on everyone’s mind will be the changes in the repo rate. There are expectations that a 25 basis points cut in lending rate to boost the slowing economy. Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks.
The SBI in a recent research report said RBI needs to go in for a larger rate cut -- more than 25 basis points -- to reverse the current slowdown in the economy.
Uday Kotak, Managing Director of Kotak Mahindra Bank says the Reserve Bank should reduce rates in view of the slowing economy, but the real challenge is to ensure transmission across deposit and lending rate. "RBI has ability to reduce interest rates and the pace and quantum is something that we can debate. We are still in a position to reduce interest rate from where they are," he said.
Experts believe that since inflation is well within the comfort zone, RBI should consider rate cut to give impetus to economic activities. On expectations from the MPC, CII Director General Chandrajit Banerjee in a statement said RBI needs to continue lowering interest rates in order to provide a stimulus to the economy.
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