New Delhi: With inflation coming down to 6.61% and economic growth slackening, Planning Commission deputy chairman Montek Singh Ahluwalia on Monday said there is a further scope for the RBI to cut lending rates.
“It is clear at the moment that the economy is growing below its potential and inflation is definitely on its way down. And these factors would suggest that there is a scope (for easing monetary policy),” Ahluwalia told media.
RBI Governor D Subbarao on Monday met Prime Minister Manmohan Singh at his residence, adding to the speculation that RBI might signal further slash in interest rates to boost economic growth which is impacted by the global crisis.
The apex bank had already injected Rs300,000 crore into the system reducing the policy and reserve ratio rates to inject funds into the cash strapped economy.
Responding to the RBI steps, several banks including the largest lender SBI have cut lending and borrowing rates.
State-owned banks like the Punjab National Bank, Bank of Baroda and Dena Bank on Monday slashed their benchmark lending rates by up to 75 basis points.
The government, in its mid-year review of the economy presented in Parliament recently said there was considerable scope for monetary policy easing over the next 6-12 months to offset the global increase in demand for money that is being transmitted to India.
“We should be watching the situation carefully and we should not hesitate to take further steps. These matters are being discussed...our prospects for inflation justify taking a stronger monetary position,” Ahluwalia said.
Inflation which had peaked to 12.91% in August came down to 6.61% in December.