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News updated at 1:59 AM IST

Bankers see 50 bps cut in Jan

Mumbai, Dec 18, 2012, (PTI): 22:13 IST
Bankers are expecting a 0.5 per cent reduction in key short-term lending rate by RBI in January after the central bank’s policy review kept rates unchanged, but gave sufficient hints of a rate cut next month.

Bankers also said a cut in interest rates is unlikely for the time being.
“I personally feel that in the January policy there will not be a baby-step cut of the repo but a higher, say 50 bps (0.5 per cent) cut,” Indian Overseas Bank Chairman and Managing Director M Narendra said.

ICICI Bank CEO and Managing Director Chanda Kochhar said, “RBI has indicated monetary policy easing in the coming quarter. This signal of a shift in the focus of monetary policy from inflation to growth is a welcome move.”

Earlier in the day, the apex bank left key policy rates - the repo - and cash reserve ratio unchanged at 8 and 4.25 per cent respectively.

Bankers also said that RBI policy review has given them clarity to price their products, including deposits.

While ruling out any immediate lending rate cut, Indian Overseas Bank said that “overall the policy review is very favourable to banks as it has given us clear indication on inflation, which is heading down, and also a clearer view that a larger repo cut is on the way.”

Narendra pointed out that there is a firm indication to banks that they can cut deposit rates as RBI has clearly said interest rates are going to come down going forward.

HDFC Vice-Chairman and CEO Keki Mistry said, “We will see lower interest rates in 2013. I expect RBI to cut rates by 0.50 per cent before March and more rate cuts from April.”

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