The Hindu Business Line : Bankers expect cut in repo rate

NEW DELHI: After slashing the requirement for banks to keep cash with the central bank (CRR) by 150 basis points, the Reserve Bank of India (RBI) may now go for a cut in short term lending rate (repo) by 25-50 basis points to infuse further liquidity in the system, bankers said.

“There may be 50 basis point cut in repo rate in the mid-term policy review,” UCO Bank Chairman and Managing Director, Mr S K Goel said. The central bank is scheduled to announce its mid-term monetary policy review on October 24.

The repo rate was last raised by 50 basis points to nine per cent in the first quarterly review of the credit policy announced on July 29.

Punjab National Bank Executive Director, Mr J M Garg said expectations are that there could be some cut in the repo rate. The central bank would take a decision depending on how the situation unfolds, he said.

With liquidity crunch becoming a major issue in the system and inflation falling below 12 per cent mark, the RBI reversed its tight monetary policy recently.

In order to infuse about Rs 60,000 crore liquidity in the cash-strapped banking system, the apex bank had slashed the requirements for banks to keep cash with the central bank by 150 basis points.

The decision, taken on Monday and Friday ahead of the mid-term review, came into effect from yesterday.

According to the HDFC Bank Chief Economist Mr Abheek Barua, a fall in inflation may prompt RBI to cut repo rate by 25 basis points in the mid-term review later this month. - PTI

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