Rate cut by RBI not likely before January next year, says Uday Kotak

Reserve Bank of India (RBI) could cut rates only in January-June period of the next year as inflation is still high, Kotak Mahindra Bank Vice Chairman and Managing Director Uday Kotak said on Tuesday.

"I am still of view that some time in the first half of the calender, we could see rate cut from the RBI," Kotak said at an event in the national capital.

"The weightage of oil and energy in CPI is much lower than WPI. With the crude oil coming down, it will have some impact on number of products... We are still very far away from 6 per cent CPI by January 2016," he added.

The August wholesale price inflation (WPI) declined sharply to a near five-year low of 3.74 per cent on declining prices of vegetables and other food articles from 5.19 per cent in July and 6.99 per cent in August 2013.

The central bank has been maintaining status quo for sometime now in its bid to rein in inflation. In its August policy review, RBI chose not to change rate as it perceived upside risks to inflation in view of uncertain monsoon and its impact on food production as also volatile international oil prices.

Accordingly, it maintained the repo rate at 8 per cent, the reverse repo at 7 per cent and the cash reserve ratio at 4 per cent.

On Monday, RBI Governor Raghuram Rajan said prices across the board have to come down to enable him to reduce key rates.

"Inflation is high not only in food, but also in non-food items and the best solution for the country is to bring it down. Then I can cut interest rates," Rajan had said.

"I have no desire to keep interest rates high for even a second longer. I want to bring down interest rates when it is feasible and that would be when we have won the fight against inflation," he had said.

"There is no point in cutting interest rates to see inflation pick-up again," said the RBI Governor, adding that right now he thinks the central bank is continuing the way it proposed recently.