Mumbai: India’s economy is reviving after slowing in the third quarter, top economic adviser Suresh Tendulkar said on Thursday. The Reserve Bank of India on Wednesday reduced the repurchase rate to 5% and the reverse repurchase rate to 3.5%. The rate cuts came amid slower non-food credit growth and a decline in inflation. Banks are being overcautious, he said, and should follow up deposit rate cuts with reductions in lending rates. The Indian economy is reviving with the bottoming out of the slowdown, he added.
Goldman Sachs: RBI may cut CRR by 150 bps
Mumbai: The Reserve Bank of India is likely to cut the cash reserve ratio (CRR), the proportion of deposits banks need to keep with it, by another 150 basis points by mid-2009, Goldman Sachs said in a note. The CRR currently stands at 5%.
But Goldman does not foresee further reverse repo cuts until the end of the elections.
“...it will be politically inexpedient for the RBI to cut the administered rate during an election, and reducing the reverse repo below the savings rate would hurt bank profitability,” it said.