The economic growth has decelerated and we would like environment to reverse and see some aggressive growth taking place. However, I would not take a call on the policy, but we are more interested in the guidance the central bank would be giving us'', said Bank of Baroda managing director MD Mallya.
He added that one has to look at how the cost of funds and liquidity situation would be after the policy. The banks might not be in a position to trim the lending rates immediately. Bank of Baroda is one of very few bank that raised deposit rates on shorter maturities due to poor liquidity conditions. The last fortnight of the financial year 2011-12 saw the deposit growth reaching a seven year low of 13.4%.
The other banks which raised the returns for deposits are State Bank of India, Federal Bank and Bank of India (BoI). BoI increased rates on deposit rates of select maturities by up to 75 bps.
According to Alok Misra, CMD, Bank of India, The liquidity situation has improved and the central bank may go for a 25 basis points repo cut or a 50 bps cut in Cash Reserve Ratio(CRR) in two tranches to bring the cost of funds down. The idea is what message they would be sending to the markets''.
He added that the banks would not trim the lending rates if there is any rate cut in the policy because of the high deposit rates and would take two to three months for cost of funds to average out. With the inflation not tamed, the real inflation data would be evident only after July when the base effect is gone'', he said.
Canara Bank CMD S Raman said that the lower than expected IIP numbers make a good case for a repo rate cut in the monetary policy meet. "The economy requires some stimulation and this would be the right time to provide the much needed impetus. We expect a 25-50 bps cut in repo rates and a 25 bps cut in CRR," he said.
"There are certain imponderables like the oil prices which could spike inflation rates," said Melwyn Rego, executive director, IDBI Bank. He expects the RBI to maintain status quo as far as interest rates are concerned.
He said that the core inflation at 5.7% is above RBI's comfort levels of 5%, and therefore a repo rate cut seems unlikely. He said that from the consumer's point of view the repo rate cut will not be of significance since it will not lead to an immediate change in deposit or lending rates. Nevertheless for the full fiscal Rego expects good steady credit growth as inflation rates will progressively begin to cool off.