RBI may go for another rate cut on Oct 4: Experts

The RBI may cut the key policy rate again on Friday, the fifth in row, to complement the government's measures like reducing corporate tax and promoting credit offtake to spur economic activity during the festive season amid range-bound inflation.

The RBI Governor Shaktikanta Das headed Monetary Policy Committee (MPC) will announce the fourth bi-monthly monetary policy for 2019-20 on Friday, October 4, after its three-day meeting.

The central bank has already slashed the repo rate (short-term borrowing rate) four times aggregating to 1.10 percentage points since January.

At its previous meeting in August, the MPC had reduced the benchmark lending rate by an unusual 35 basis points to 5.40%.

The upcoming MPC meeting comes in the backdrop of the RBI's mandate to banks to link their loan products to an external benchmark, like repo rate, for faster transmission of reduction in policy rates to borrowers from October 1.

Ahead of the meeting, the Das-headed Financial Stability and Development Council (FSDC) sub-committee took stock of the prevailing macroeconomic situation.

Earlier, the RBI Governor had said the government has little fiscal space, giving hopes that the RBI may provide more monetary stimulus to prop up the economy.

The government's fiscal space has been squeezed on account of cut in rates of corporate tax as well as lowering of GST on various goods. Revenue collection too has been below the Budget estimates.

Experts opined that another rate cut is on the cards as the government's hands are tied and the onus of taking initiatives now rests with the central bank.

Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE, said the government has taken a series of measures in the last few weeks to drive structural changes in the Indian economy.

However, most of these are enabling provisions to ease supply side pressures while the key challenge of reigniting demand remains.

'Thus, we are hoping that the central bank to cut the key signalling rate of repo by 25 bps to 5.15% next week to complement the government's fiscal stimulus," he said.