RBI unlikely to cut key rates in policy: bankers

With inflation declining sharply in recent weeks and slowing demand, the Reserve Bank of India (RBI) may signal softer interest rates even though it may not tinker much with key-rates in the quarterly review of its annual monetary policy, bankers said.

"At present, banks have surplus funds following the liquidity infusions by the RBI. But the low-demand is causing supply-side issues to lenders. Given these factors, the RBI is unlikely to cut its rates further (in its quarterly review of annual monetary policy, slated for January 27)," IDBI Bank Deputy Managing Director O V Bundellu told PTI here.

Prime Minister Manmohan Singh had also indicated that the falling inflation would give monetary flexibility to deal with the difficult economic environment and the RBI is widely expected to announce measures that would help the economy to push growth.

 

State Bank of India Chairman O P Bhatt had also said that the RBI may not cut its key-rates further soon. "At the moment, I do not expect (any cuts in the RBI key-rates)," Bhatt said.

After rising to multi-year highs in mid-last year, the WPI-based inflation started declining in recent months in line with falling global crude and commodity oil prices and currently stands at 5.24 per cent.

Indian Banks' Association Chief Executive K Ramakrishnan agreed to this view, saying that the central bank is unlikely to tinker with its rates in the quarterly policy review unless demand picks up in the market.

"If they (RBI) cut rates further, that would pump in more money into the system. There is already enough liquidity in the system, but a few takers for credit. The RBI may not cut its rates further in the policy," Ramakrishnan said.