RBI likely to cut repo rate

New Delhi, Dec. 4: Reserve Bank Governor Urjit Patel is expected to again go in for a 0.25 per cent interest rate cut at its next policy review on Wednesday, with an aim to cushion the impact of demonetisation, a majority bankers feel.

This will be the first monetary policy review after demonetisation of old `500 and `1,000 currency notes following which banks witnessed surge in deposits.

Patel, in his first policy as RBI governor, in October reduced the repo rate (short term lending rate) by 0.25 per cent to 6.25 per cent.

This will be the second policy which will be based on recommendations of the Monetary Policy Committee.

RBI has cut repo by 1.75 per cent since January 2015.

Canara Bank MD and CEO Rakesh Sharma said that with softening of inflation, “we expect that RBI may go for a 25basis point rate cut in the upcoming policy”.

Echoing similar views, IDBI Bank CFO R.K. Bansal said the central bank would ease the repo rate to 6 per cent.

“The new two quarters are very important and they would like to see the impact of demonetisation,” Mr Bansal said.

Bankers opined that with the increase in Market Stabilisation Scheme (MSS) ceiling to `6 lakh crore from `30,000 crore, RBI is unlikely to continue to apply the incremental cash reserve ratio.

In order to manage liquidity conditions, RBI had asked banks to maintain an incremental CRR of 100 per cent on deposits accrued between September 16 and November 11, 2016.

THIS WILL be the second policy which will be based on recommendations of the Monetary Policy Committee