RBI's MPC meeting starts with expectation of another rate cut

New Delhi: The Monetary Policy Committee headed by RBI Governor Shaktikanta Das Monday started deliberations on the third bi-monthly policy review of the current financial year, amid expectations of yet another 25 basis points cut in lending rate to boost the slowing economy. The central bank has already reduced the repo rate three times in the last as many MPC meetings.

"The MPC will meet during August 5 to 7, 2019, for the Third Bi-monthly Monetary Policy Statement for 2019-20. The resolution of the MPC will be placed on the website at 11.45 am on August 7, 2019," the RBI has said in a statement.

Besides rate cut, the industry also expects the six-member MPC to take steps to improve liquidity situation and also ensure transmission of rate cuts to borrowers by the banks.

Meanwhile, Finance Minister Nirmala Sitharaman on Monday reviewed performance of banks with top management of public sector lenders and major private banks.

On expectations from MPC, Union Bank of India Managing Director and CEO Rajkiran Rai G said the MPC is likely to cut rate by 25 basis points. "At this point of time, we need growth impetus. I am sure they will reduce rates," he said.

Industry body CII in a statement said the central bank started its interest rate easing cycle in February 2019, taking cognizance of the headwinds to growth and inflation reading remaining below the RBI's target of 4%.

However, the transmission of the rate cuts to the end-consumers has remained gradual and relatively lower than the repo rate revisions, it said. The CII had said the RBI should cut cash reserve ratio (CRR) by 50 bps which will release around Rs 60,000 crore into the system.

"This along with infusing liquidity in the banking system will also reduce the burden on banks' resources, given the fact that currently, the credit-deposit ratio is hovering at a high of 77-78%," it added.

When asked for expectations from the MPC, Anshuman Magazine, CBRE's chairman and CEO for India, South East Asia, Middle East and Africa had said that in the light of increasing investor confidence and consumer spending, the economic sentiments are currently looking up.

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