RBI may cut CRR by 25bps; keep repo rate unchanged: CARE
CARE Ratings has come out with its report on "Expectations of Monetary Policy: October 2012." According to the rating agency, the RBI is scheduled to announce its Q2 review of monetary policy on 30th October 2012. The RBI is expected to keep interest rates unchanged while reducing the CRR by 25 bps.
October 26, 2012 / 19:26 IST
CARE Ratings has come out with its report on "Expectations of Monetary Policy: October 2012." According to the rating agency, the RBI is scheduled to announce its Q2 review of monetary policy on 30th October 2012. The RBI is expected to keep interest rates unchanged while reducing the CRR by 25 bps.
The RBI will be reviewing the economic situation on Monday the 29th and annoucing its monetary policy on Tuesday the 30th of October. CARE Ratings expects a cut in CRR of 25 bps, and no change in interest rates. While the market is talking of SLR reduction too, we do not expect the same as the present level for the system is around 28% and hence well above the stipulated level of 23%.Expectations of Monetary Policy: October 2012The RBI is scheduled to announce its Q2 review of monetary policy on 30th October 2012. We expect RBI to keep interest rates unchanged while reducing the CRR by 25 bps.Our expectations
The UPA government took a series of policy actions last month, demonstrating its resolve to manage fiscal deficit. Following these, there is additional pressure on the RBI to announce a policy which would send a signal of growth revival and positive sentiments in the economy.However, we expect, in this policy too, its focus on taming inflation would remain. There are expectations that the RBI may resist from a rate cut and chose to retain the current policy rates (repo-8.0%). Further, given the prevailing tight liquidity conditions, there exists a strong case for the RBI to opt for easing monetary conditions by cutting the CRR by 25 basis points (bps), and thereby increase the lendable/ investible resources of banks, which in turn may induce banks to lower interest rates.In this context, we expect the following from Tuesday’s policy review:CRR to be reduced by 25 bps to 4.25%
Repo rate to remain unchanged at 8.00%
Reverse repo to remain unchanged at 7.00%
SLR to be retained at 23%Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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