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The Monetary Policy Committee headed by RBI Governor Shaktikanta Das on Monday started deliberations on the second bi-monthly policy review of the current fiscal, amid expectations of a 25 basis points cut in lending rate to boost the slowing economy.
The central bank has slashed the short-term lending rate (repo rate) by 25 basis points (0.25 percentage points) each in its last two policy reviews.
“The Monetary Policy Committee (MPC) will meet during June 3, 4 and 6, 2019 for the second bi-monthly Monetary Policy Statement for 2019-20. The resolution of the MPC will be placed on the website at 11.45 AM on June 6, 2019,” the RBI said Monday.
The upcoming policy review will be RBI’s first after the results of 2019 Lok Sabha elections.
Uday Kotak, Managing Director of Kotak Mahindra Bank says the Reserve Bank should reduce rates in view of the slowing economy, but the real challenge is to ensure transmission across deposit and lending rate.
“RBI has ability to reduce interest rates and the pace and quantum is something that we can debate. We are still in a position to reduce interest rate from where they are,” he said.
Experts believe that since inflation is well within the comfort zone, RBI should consider rate cut to give impetus to economic activities.
On expectations from the MPC, CII Director General Chandrajit Banerjee in a statement said RBI needs to continue lowering interest rates in order to provide a stimulus to the economy.
“This is needed to address the slowdown in production and sales across consumer goods categories including segments such as passenger cars, two-wheelers as well as non-durables,” he said, adding that with inflation still far below RBI’s target of 4 per cent, there is an ample room for reduction in the policy rate.
SBI in a recent research report said RBI needs to go in for a larger rate cut, more than 25 basis points, to reverse the current slowdown in the economy.
India’s GDP growth slowed to a five-year low of 5.8 per cent in the fourth quarter of 2018-19 mainly due to poor performance of agriculture and manufacturing sectors.
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