RBI may announce more measures to counter slowdown
By Vaibhav Aggarwal
Mar 9, 2009
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As the Indian economy is slowing down, global financial institutions expect the apex body, RBI to take more steps to revive up the economy.

In a research report, Moody's, an arm of Moody's, stated, "The monetary easing cycle looks set to continue in coming months, as a deterioration in economic conditions is likely."

The recent monetary measures taken by the RBI would not revive enough demand in the economy, said some of the firms.

The latest key policy cuts by the RBI include 50 basis points reduction each in repo rate and reverse rate to 5% and 3.5% respectively. Although the global financial firms feel that this rate cut would not help to mop up the demand to a greater extent but it will certainly cushion the downside. However it will not prevent the growth of the slowdown.

A report by Morgan Stanley states that, "Banks are reluctant to respond in the form of aggressive lending rate cuts due to rising credit costs (NPLs) on past loans and also because their liability (deposits) side takes a longer time to price in the declining interest rate environment."

They feel that the present rate cut with not be able to revive the demand as real borrowing costs are still high in comparison to the real growth trend. Hence they expect that RBI would come up with some more measures in the coming months to counter the economic slowdown.


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