RBI cuts policy rates in its annual monetary policy review
By Neelima Shankar
Apr 22, 2009
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The Reserve Bank of India (RBI) unveils its annual monetary policy by lowering the policy rates at below industry expectations.

The banking regulator has announced 25 basis points cut in both the repo and reverse repo rate to 4.75% and 3.25% respectively. However the cash reserve ratio CRR) was kept unchanged at 5%.

Industry sources say that although the cut by RBI would reduce the credit cost but the regulator should have resorted to deeper cuts in the policy rates.

Director-General of Confederation of Indian Industry, Chandrajit Banerjee said, "A deeper cut in repo and reverse repo rates by at least 50 basis points would have been appropriate, given the fact that the cost of credit is still high."

However the industry welcomed the move but said that it was below their expectations. "The corporate sector was expecting 50 basis points cut in the repo and reverse repo rates," said Sajjan Jindal, President of Assocham.

Jindal feels that the benchmark prime lending rates (PLRs) of commercial banks should come down to a single-digit. The PLR of the private-sector banks still range between12.7% and 16.75% despite of the several cuts announced by RBI to signal easing interest rates.

The PLR for most PSU banks stand between 11.5% and 13.5%.

Meanwhile RBI expects the GDP growth for 2009-10 to stay around 6% with inflation pegged at 4% by the end of the fiscal. Statutory liquidity ratio (SLR) stays unchanged at 24%.


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