With stock markets tumbling and industrial production plummeting, RBI may inject another dose of liquidity booster by cutting benchmark short-term (resp) lending rate by 25-50 basis points at the mid-term review of credit policy this week, bankers and experts feel.After a series of cut in CRR the amount banks need to keep with the central bank RBI is scheduled to announce fresh measures in its review on October 24.
Although the government and the RBI, through a series of measures, have made provision for unlocking over Rs 2,00,000 crore of funds, the stock markets have continued the downward swing with BSE benchmark Sensex closing below the psychological 10,000 points on Oct 17. There is a possibility of repo rate cut to help economy tide over the crisis, a Finance Ministry official said, adding the suggestion was also discussed at the meeting of the high-powered liquidity panel.
According to the UCO Bank Chairman and Managing Director S K Goel, there may be 50 basis point cut in repo rate in the mid-term policy review.The repo rate was last raised by 50 basis points to nine per cent in the first quarterly review of the credit policy announced on July 29.Prime Minister''s Economic Advisory Council Chairman Suresh Tendulkar said, at this juncture I would not rule out a cut in repo rate.
He said since the inflation seems to easing, the RBI as well as the government should gradually, shift policy stance towards growth.Tendulkar''s remarks, as the head of the high-level think-tank, assumes significance in view of the sharp deceleration in industrial growth witnessed in August. The Index of Industrial Production (IIP) growth rate during the month nosedived to 1.3 per cent from 10.9 per cent in the same month a year ago.
Even Goldman Sachs in its report said, we expect that in the current extremely difficult global environment, with tight liquidity, weakening activity and falling commodity prices, the RBI should prioritise financial stability and growth concerns over inflation.
RBI is, therefore, expected to cut repo rate by 50 basis points on or before the policy meeting, it said. In last one month, RBI has announced to inject Rs 1,60,000 crore in the cash-starved banking system through mix of CRR and Statutory Liquidity Ratio.
Although the government and the RBI, through a series of measures, have made provision for unlocking over Rs 2,00,000 crore of funds, the stock markets have continued the downward swing with BSE benchmark Sensex closing below the psychological 10,000 points on Oct 17. There is a possibility of repo rate cut to help economy tide over the crisis, a Finance Ministry official said, adding the suggestion was also discussed at the meeting of the high-powered liquidity panel.
According to the UCO Bank Chairman and Managing Director S K Goel, there may be 50 basis point cut in repo rate in the mid-term policy review.The repo rate was last raised by 50 basis points to nine per cent in the first quarterly review of the credit policy announced on July 29.Prime Minister''s Economic Advisory Council Chairman Suresh Tendulkar said, at this juncture I would not rule out a cut in repo rate.
He said since the inflation seems to easing, the RBI as well as the government should gradually, shift policy stance towards growth.Tendulkar''s remarks, as the head of the high-level think-tank, assumes significance in view of the sharp deceleration in industrial growth witnessed in August. The Index of Industrial Production (IIP) growth rate during the month nosedived to 1.3 per cent from 10.9 per cent in the same month a year ago.
Even Goldman Sachs in its report said, we expect that in the current extremely difficult global environment, with tight liquidity, weakening activity and falling commodity prices, the RBI should prioritise financial stability and growth concerns over inflation.
RBI is, therefore, expected to cut repo rate by 50 basis points on or before the policy meeting, it said. In last one month, RBI has announced to inject Rs 1,60,000 crore in the cash-starved banking system through mix of CRR and Statutory Liquidity Ratio.
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