Dec 18, 2012, 10.48 AM IST
Uday Kotak, executive vice-chairman and managing director of Kotak Mahindra Bank is hoping for a rate cut between December and January. "Our view is that between now and March we can see 50 bps point repo rate cut in totality," he told reporters.
The Reserve Bank of India (RBI) is expected to keep interest rates on hold on Tuesday despite government pressure for a cut, sticking to its guidance that it will not ease monetary policy before early next year as cooling inflation is still too high for comfort.
The RBI has kept its key borrowing rate at 8 percent since April, defying calls from business and politicians to do more to cushion the economy from a downturn that has dragged it towards its slowest growth rate in a decade.
Despite signs that price pressures are moderating, the RBI is expected to wait for more clarity on the inflation trajectory before resuming rate cuts, in contrast to other big emerging market central banks in China, Brazil and South Korea that have been more aggressive in easing policy to stimulate growth.
A majority of analysts polled by Reuters expects the RBI to keep the repo rate on hold, with respondents split about whether it will cut the cash reserve ratio for banks. According to C Rangarajan of PMEAC, the RBI has expressed its intention and if the trends are in the right direction, it will definitely act for January. However, he is not sure whether the RBI will act in December itself.
The wholesale price index, India's main gauge for inflation, has remained above 7 percent for the past three years, a key reason why the RBI has refrained from lowering policy rates since April's 50-basis point cut.
In doing so, the central bank has repeatedly resisted pressure from the finance ministry to cut rates to prop up an economy that has posted GDP growth below 6 percent for the past three quarters and is on track for its weakest annual performance in a decade in the fiscal year ending March.
With inputs from Reuters
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