Room for further rate cuts in future: ING

Global financial services firm ING believes there is room for further softening of short term lending and borrowing rates.

"The 25 basis points cut leaves door open for further rate cuts in future as inspite of incipient signs of recovery in real economy, it will take some time before cross border flows start picking up," ING Investment Management said in its Factsheet for April, 2009.

The Reserve Bank of India (RBI) in its policy review for 2009-10 had reduced the key policy rates (repo and reverse repo) by 25 basis points each, while leaving the cash reserve ration (the amount of cash the banks need to park with RBI) unchanged.

The repo and reverse repo rate now stands at 4.75 per cent and 3.25 per cent, respectively. CRR and Statutory Liquidity Ratio, however, remain unchanged at 5 per cent and 24 per cent, respectively.

"RBI will continue to maintain a soft monetary policy stance till it meets its objective of revival of growth," the report said.

Since Lehman Brothers crisis in mid-October, the RBI has reduced short-term lending (repo) rate from 9 per cent to 4.75 per cent now, while it brought down short-term borrowing (reverse repo) rate from six per cent to 3.25 per cent at present.

Besides, ING expects that "inflation would continue to remain low for next few months".