RBI promises rate cut in Jan, keeps it unchanged for now

"In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to threats to growth from this point onwards," RBI Governor D Subbarao said in the mid-quarter monetary policy review.

The Reserve Bank of India (RBI) left the short-term lending (repo) rate and the cash reserve ratio -- the amount of deposits banks have to park with RBI-- unchanged at 8 per cent and 4.25 per cent, respectively.

RBI said that it is closely monitoring the evolving growth-inflation dynamics and it is likely to ease monetary policy in the January-March quarter.

The third quarter review will be unveiled on January 29.

 

Bankers felt that RBI would keep the promise and cut key interest rates next month giving them a leeway to pass on the benefits to retail consumers and corporates.

"I don't think banks will change their lending or deposit rates at the moment," Oriental Bank of Commerce CMD S L Bansal said, adding banks would consider a rate cut once RBI softens monetary stance.

HDFC Vice-chairman and CEO Keki Mistry said: "We will see lower interest rates in 2013. I expect RBI to cut rates by 0.50 per cent before March and more rate cuts from April."

As regards the corporate sector, industry chambers expressed disappointment but took satisfaction from RBI's guidance that the central bank would consider a rate cut in the January policy review. MORE