RBI likely to lower cash reserve ratio to complement rate cut
Updated: May 01, 2013 05:58:19pm
New Delhi, May 1 (KNN) With all signs pointing to inflation coming down, the Reserve Bank of India (RBI) is expected to cut interest rate by 0.25 percentage points and inject extra cash into the banking system by reducing the cash reserve ratio (CRR) for banks.
The RBI will do a credit policy review on Friday.
Experts believe the central bank has every reason to go for rate cut as the fall in crude oil, gold prices and global commodity prices are bound to have a positive impact on the current account deficit.
India’s headline measured by the whole sale price index inflation dropped to 5.96 per cent in March compared to 6.84 in February, the lowest recorded inflation data in 40 months. This will give the RBI Governor Duvvuri Subbarao more room than before to cut rates to boost both economic and industrial growth.
Exporters too want cheap access to credit in the wake of tough competition in the global market and high cost of production. As it is, exports had decline by near 2 per cent in the fiscal 2012-13.
India Inc has been demanding a rate cut to promote economic growth which fell to decade's low of 5 per cent in 2012-13. The economic growth was 6.2 per cent in 2011-12.
The SME sector too would welcome the rate cut which will bring down their cost of production and make them more competition.
RBI’s policies thus far have kept banks’ cost of deposits high, preventing them from cutting lending rates. CRR is the portion of deposits banks need to part with RBI. The Central Bank’s move to reduce CRR would urge other banks to offer similar interest rate cuts.
Significantly, most banks experienced a dismal credit growth as low as 13.9 per cent in April on account of companies delaying projects and consumers holding back high value purchases. Creditors too were wary of incurring bad loans in a general economic slowdown. (KNN)
The RBI will do a credit policy review on Friday.
Experts believe the central bank has every reason to go for rate cut as the fall in crude oil, gold prices and global commodity prices are bound to have a positive impact on the current account deficit.
India’s headline measured by the whole sale price index inflation dropped to 5.96 per cent in March compared to 6.84 in February, the lowest recorded inflation data in 40 months. This will give the RBI Governor Duvvuri Subbarao more room than before to cut rates to boost both economic and industrial growth.
Exporters too want cheap access to credit in the wake of tough competition in the global market and high cost of production. As it is, exports had decline by near 2 per cent in the fiscal 2012-13.
India Inc has been demanding a rate cut to promote economic growth which fell to decade's low of 5 per cent in 2012-13. The economic growth was 6.2 per cent in 2011-12.
The SME sector too would welcome the rate cut which will bring down their cost of production and make them more competition.
RBI’s policies thus far have kept banks’ cost of deposits high, preventing them from cutting lending rates. CRR is the portion of deposits banks need to part with RBI. The Central Bank’s move to reduce CRR would urge other banks to offer similar interest rate cuts.
Significantly, most banks experienced a dismal credit growth as low as 13.9 per cent in April on account of companies delaying projects and consumers holding back high value purchases. Creditors too were wary of incurring bad loans in a general economic slowdown. (KNN)
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