The Reserve Bank of India, or RBI, has cut the repo rate by 50 basis points to 7.5% with effect November 3.
It has also cut CRR, or cash reserve ratio, by 100 bps in two stages to 5.5%. The first stage of CRR cut would be with effect October 25 and the second stage would come into effect November 8. The 100-bps CRR cut will infuse Rs 40,000 crore into the system, the RBI said.
The central bank will also cut SLR to 24% by 100 bps from November 8 onwards. It has allowed refinance to banks up to 1% of NDTL, or net demand and time liabilities, for 90 days.
In a statement on its website, the RBI said, "The Reserve Bank has reviewed the current and evolving macroeconomic situation and liquidity conditions in the global and domestic financial markets."
So, will bankers cut rates following the RBI liquidity booster?
Keki Mistry, Managing Director, HDFC, said one would have to gauge the situation before cutting lending rates. "I would not cut PLR, or prime lending rates, unless funding costs come down. Interest and borrowing rates are still high. We see need for a reverse repo rate cut," he said.
KC Chkrabarty of Punjab National Bank expects rates to come down. "I am unsure about the timeframe as that would depend upon individual banks. We plans to cut rates further by the end of the current year. I will re-examine the situation on December 1 and if need be the bank would definitely cut PLR again."
Keki Mistry, Managing Director, HDFC, said one would have to gauge the situation before cutting lending rates. "I would not cut PLR, or prime lending rates, unless funding costs come down. Interest and borrowing rates are still high. We see need for a reverse repo rate cut," he said.
KC Chkrabarty of Punjab National Bank expects rates to come down. "I am unsure about the timeframe as that would depend upon individual banks. We plans to cut rates further by the end of the current year. I will re-examine the situation on December 1 and if need be the bank would definitely cut PLR again."
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