On 4th March 2009, the Reserve Bank of India announced the cut in repo and reverse repo rates by 50 basis point each with immediate effect. Along with this, the repo, the rate at which the RBI lends short-term funds to banks, currently stands at 5 per cent from 5.5 per cent and the reverse repo, the rate at which the RBI borrows from banks, at 3.5 per cent from 4 per cent.
Now the banks are likely to cut both lending and deposit rates. This is the second rate cut by the RBI this calendar year. With ease in inflation rate to 3.36 per cent for the week ended February 14, 2009 and GDP growth falling to 5.3 per cent for the third quarter, rate cut by RBI was broadly expected. RBI has also cautioned banks to monitor their assets and take timely action to prevent defaults. The average PLR for most public sector banks is now 12.5 per cent.
Now the banks are likely to cut both lending and deposit rates. This is the second rate cut by the RBI this calendar year. With ease in inflation rate to 3.36 per cent for the week ended February 14, 2009 and GDP growth falling to 5.3 per cent for the third quarter, rate cut by RBI was broadly expected. RBI has also cautioned banks to monitor their assets and take timely action to prevent defaults. The average PLR for most public sector banks is now 12.5 per cent.
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