New Delhi: The Reserve Bank of India (RBI) may cut key lending rates by another 25 basis points on Thursday to boost economic activities amid fears of global slowdown impacting domestic growth prospects, experts said.
The RBI had reduced the repo rate by 25 basis points in February after a gap of 18 months. A back-to-back cut in interest rate would provide relief to borrowers in the election season. The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das will meet for three days in Mumbai and announce the decision on interest rate on April 4. It would be the first bi-monthly monetary policy of 2019-20.
Das has already held meetings with stakeholders including industry bodies, depositors association, MSME representatives and bankers. The industry is pitching for another rate cut as the inflation is well below the RBI’s mandate of 4 per cent and need the for boosting economic growth is pressing.
V K Sharma, Head PCG and Capital Markets Strategy at HDFC Securities, said the market has factored in a 25 bps cut and a change in stance to accommodative from neutral, adding that the expected increase in liquidity and cut in interest rates auger well for the market.
PFB Shanti Ekambaram, President (Consumer Banking) at Kotak Mahindra Bank, said global and local factors will guide future policy action. Consumption has slowed down a bit and the investment cycle is still slow. “It is likely that there could be another 25 bps rate cut later in the year, but that would be dependent on inflation and growth data.
In addition, the central bank will keep an eye on the post-elections budget, monsoons and oil prices,” Ekambaram added. Director General of CII Chandrajit Banerjee said the inflation trajectory has remained benign which further warrants a reduction in interest rate.
