BANKING
| ADB expects RBI to cut interest rates Wed, 11 Apr 2012 20:15:31 +0530 |
| Business Standard Economy Policy News Days before the Reserve Bank of India's (RBI) annual credit policy announcement, the Asian Development Bank (ADB) today said the central bank could cut interest rates to boost growth as inflation has started showing signs of moderation. "Easing of monetary policy looks a distinct possibility. The rate cut could come," ADB Deputy Country Director Narhari Rao said. The RBI is scheduled to announce the credit policy on April 17 amid demand for cut in short-term lending (repo) rates. Following moderation in inflation and steps announced by the government in the 2012-13 Budget to contain fiscal deficit, it was expected that RBI would relax monetary policy, said the ADB's flagship publication Asian Development Outlook (ADO), which was released earlier in the day. The RBI, which had raised interest rates 13 times since March 2010 to contain spiraling inflation, is yet to reverse its decision though the price situation has improved considerably. It kept the rates unchanged in its policy reviews in December 2011 and February 2012. Wholesale price-based inflation, which remained around 9% during most of 2011, moderated to 6.95% in February. The economic growth slowed down to 6.9% in 2011-12 fiscal, from 8.4% in the preceding two years. It is projected to be around 7.6% in the current fiscal. The ADO also said that monetary tightening by RBI has affected credit growth, investments and resulted in deterioration of asset quality of banks. "Credit growth moderated in 2011-12 across a broad spectrum of activities, reflecting slowing economic activity, monetary tightening, and bank's risk aversion. Asset quality of banks deteriorated moderately due to weaker business condition," it said. The report also observed that the RBI deregulated the savings deposit rate and to a large degree, interest rates on various non-resident Indian deposit facilities. |
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