The Reserve Bank of India (RBI) is likely to
keep policy rates unchanged in the third
quarterly review of monetary policy on Tuesday, January 24, even as
inflation and economic growth rate have eased, say bankers.
"I don't see
moderation in the interest rate (in the upcoming policy review). CRR (Cash Reserve Ratio) cut I am not hopeful," SBI Chairman Pratip Chaudhuri said.
"I think there would be strong measures to indicate that
RBI wants inflation to be stamped out totally," he said.
Headline inflation fell to a two-year low of 7.47 per cent in December, 2011. Food inflation stood at (-)0.42 per cent as of January 7.
On the other hand, in the July-September the economy grew by 6.9 per cent - the lowest level in over two years.
Indian Overseas Bank CMD M Narendra also said
the central bank is likely to keep policy rates unchanged for a while.
There is a little possibility of changing the CRR in the coming policy review, Narendra added. At present, CRR, the portion of deposits which commercial banks keep with the central bank, stands at 6 per cent.
RBI governor hints at softening of monetary policy Canara Bank Chairman and Managing Director S Raman said that there was some possibility of RBI slashing CRR by 25 basis points to infuse liquidity in the light of moderation in industrial activity.
Kotak Mahindra Bank Managing Director Uday Kotak said: "Domestic liquidity is tight as you can see at numbers...at the most the market can hope something on CRR to correct the domestic liquidity situation".
Banks are drawing over Rs 1,00,000 crore from the repo window everyday, even though
RBI is carrying on Open Market Operation on weekly basis to ease liquidity pressure.
It is to be noted that in its last review in December, the RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation.
"From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth," RBI Governor D Subbarao had said in the last policy review.
The central bank had hiked interest rates by 375 basis points between March 2010 and October 2011 to deal with the persistently high inflation, including rising prices of food items.
The government has already revised the GDP growth forecast downwards for the current fiscal. GDP is expected to clock a growth rate of about 7 per cent against 9 per cent projected earlier.
Meanwhile, Commerce and Industry Minister Anand Sharma also made a strong case for lowering of interest rates in the wake of industrial slowdown.
"We are of the considered view that interest rates for investment for industry should be lowered. We have taken up with the finance minister who is receptive and positive particularly for small and medium enterprises," Sharma told reporters on the sidelines of SAARC Business Summit organised by Ficci in New Delhi.
He expressed the hope that the central bank would "take a considerate view" as the economy needs infusion of funds and more investment keeping inflation under control.
The country's industrial production grew by 5.9 per cent in November 2011 against 6.4 per cent in the same period a year-ago. But it bounced back in November as compared to October 2011 when the factory output decelerated 4.74 per cent.
- With PTI inputs 
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