Bankers see 0.25% reduction in repo rate on June 18

With growth rate falling and with inflation continuing to be flat expects a rate cut

Bankers today said they expect the Reserve Bank to cut its key rates by 0.25% at the forthcoming mid-quarter review given the present need to boost growth.

"Growth has fallen and with inflation continuing to be flat, I expect the RBI to cut rates by 25 bps," Central Bank of India Chairman and Managing Director M V Tanksale told reporters on the sidelines of the Skoch summit here.

Andhra Bank also expects a similar reduction in the policy rate, Chairman and Managing Director B A Prabhakar said.

On if the bank will pass on the benefit in the case the RBI cuts rates to borrowers, Tanksale said the bank will first wait for a reduction in deposit rates which can bring down the cost of funds, before taking a call on the issue.

Terming State Bank of India's decision to lower interest rates on select deposits by up to 0.25% as a "good move", he said his bank will take a call on it after June 18, when the RBI will be reviewing its monetary policy.

Tanksale, however, conceded that deposit mobilisation continues to be a challenge in the present times.

Prabhakar said his bank may tweak its deposit rates, especially those in the short-term baskets and the one-year maturity bucket, but did not give a timeline.

Reserve Bank Deputy Governor Subir Gokarn, who heads the monetary policy department, has already hinted at a reduction in the key repo rate, due to the falling growth and crude prices.