While there are no expectations for a repo rate cut in Governor Raghuram Rajan-led Reserve Bank of India’s (RBI) annual monetary policy on Tuesday, analysts don’t rule out the possibility of a reduction in cash reserve ratio (CRR) to make the cost of funds cheaper and steps to speed up transmission of rate cuts by banks to their customers.
* 50 basis points is the reduction in repo rate by the Reserve Bank of India in two stages — 25 bps each on January 15 and March 4 — to 7.50% on the back of softening inflation and the government’s commitment to continue with the fiscal consolidation programme.
* None of the leading banks have passed on the 50 bps repo rate cut to their customers.
* 4% is the current CRR requirement — portion of deposits to be kept with the RBI — for banks.
* 9.4% is the bank credit growth in February as against 14.7% a year ago, indicating sluggish demand for loans.
What’s worrying the RBI?
* Inflation has bounced off November’s low of 3.3% to 5.4% in February 2015, but still below January 2016 target
* The recent bout of unseasonal weather developments and damage to select winter crops might stoke worries over food inflation
* Global fuel prices have also bottomed out in recent weeks, limiting further downside in inflation prints