After the US Fed rate-cut early this week, Indian bankers on Thursday said Reserve Bank may resort to a 0.25 per cent cut in the Cash Reserve Ratio (CRR) in its monetary policy review on January 29, sending strong signals for a rate cut.
Though the Reserve Bank would want to keep excess liquidity under check to contain inflation, it may still go for a CRR cut to enable banks lower interest rates in order to spur growth through increased credit offtake.
The apex bank was widely believed to pitch for stable rates, but bankers now feel it might go for a marginal CRR cut even though it would have preferred to maintain the status quo.
HDFC Chairman Deepak Parekh had said that interest rates could soften by 0.25-0.50 per cent if there was no hike in CRR.
After the Fed rate cut, there are now all the more reasons to cut rates.
Dena Bank Chief P L Gairola felt that one could expect a 0.25 per cent cut in CRR accompanied by a 0.25-0.50 per cent cut in rates.
The difference between the repo and reverse repo rates, now at 1.75 per cent, could also be reduced, he said.
High crude oil prices and an unprecedented volatility in the stockmarket may prompt the regulator to come with a tight policy, a senior official with DBS Bank said.
"A cut by 0.50 per cent in interest rate will be a fair expectation. I don't think the CRR will be hiked this time," the official said.
The recent volatility in the stockmarket is unlikely to have any major impact on the India growth-story, given the fundamentals of the economy which are strong, he said.
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