RBI not done with cuts

Prime Minister Manmohan Singh today met Reserve Bank of India Governor D Subbarao and Finance Secretary Arun Ramanathan in New Delhi to discuss the macroeconomic situation.

The meeting comes ahead of a fresh stimulus package aimed at sectors not covered in the earlier measures announced by the central bank and the government.

Along with fiscal steps from the Centre, the central bank is likely to take further monetary steps to enable banks to lower interest rates further.

“RBI is likely to cut repo and reverse repo rates by 50-100 basis points,” said an official. Further steps such as reducing the cash reserve ratio, the proportion of deposits set aside by banks, and the statutory liquidity ratio, the percentage of time- and demand-deposits that banks have to invest in approved securities, are also being contemplated.

Earlier this month, the Centre announced a 4-percentage-point cut in central excise duty, while RBI lowered the repo and the reverse repo rates by 100 basis points each to 6.5 per cent and 5 per cent, respectively. In addition, steps were taken to help the real estate sector, small and medium enterprises, and exporters.