We Report, You Decide

RBI may cut CRR, repo by 0.25 pc : bankers

New Delhi: Amidst sagging factory output and moderation in economic growth, the Reserve Bank could cut interest rate by about 0.25 per cent and release more liquidity to stimulate economic growth in its annual credit policy on Tuesday.

"My personal stance is that cut CRR…I would expect 75 basis point cut in CRR," SBI Chairman Pratip Chaudhuri said.

Last month, RBI slashed CRR (cash reserve ratio) — the percentage of deposits that banks have to keep with the RBI — from 5.5 per cent to 4.75 per cent. With this, the central bank had infused Rs 48,000 crore into the economy.

Indian Overseas Bank Chairman and Managing Director M Narendra said "given the microeconomic condition, there is expectation that the RBI would cut both repo and CRR by 25 basis points". One basis point is equal to one hundredth of one per cent.

Showing persistent sluggishness in the economy, industrial production growth slowed to 4.1 per cent in February this year, mainly due to poor performance of manufacturing sector and consumer goods segment.

At the same time, inflation has been hovering around 7 per cent and global crude oil prices are still over USD 100 per barrel, putting pressure on inflationary expectations.

Inflation rose to 6.95 per cent in February, 2012, from 6.55 per cent in January. The RBI, which increased the key policy rate 13 times between March 2010 and October 2011 to tame inflation, did not hike the repo rate (short term lending rate) in the last three policy reviews.

You might also like

Comments are closed.