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Rediff News  All News  » Business » RBI may cut rates in coming months: Kochhar

RBI may cut rates in coming months: Kochhar

January 25, 2013 10:48 IST

RBIReserve Bank of India may lower its benchmark interest rates in the coming months as inflation has eased, pursuant to which banks may also lower their rates to some extent to pass on the benefit to customers, top banker Chanda Kochhar said.

"With inflation easing, I think that we would see policy rate cuts in the coming months," ICICI Bank managing director and chief executive told PTI in an interview in Davos.

The head of India's largest private sector bank, who is in Davos in this Swiss Alpine resort town for the World Economic Forum Annual Meeting, said that the central bank has already in its last policy statement, indicated monetary policy easing in the fourth quarter of the current fiscal.

"The RBI has also been taking steps to ensure that liquidity is made available in the system.

"Wholesale term deposit costs for banks have also eased in the last few months," Kochhar said.

She, however, added that the demand deposits have been under pressure for the system.

"While we would

expect lending rates to come down as policy rates are eased, the extent of rate reductions by banks will also depend on the level and composition of deposit growth, the funding costs of banks and the demand for credit in the system," Kochhar said.

RBI in the mid-quarter monetary policy review last month, had kept key interest rates unchanged but had said that it is closely monitoring the evolving growth-inflation dynamics and it is likely to ease monetary policy in the January-March quarter.

The third quarter review will be unveiled on January 29.

In its mid-quarter monetary policy review on December 18 last year, RBI left the short-term lending rate and the cash reserve ratio -- the amount of deposits banks have to park with RBI-- unchanged at 8 per cent and 4.25 per cent, respectively.

Meanwhile, inflation based on movement in wholesale prices, touched 3-year low of 7.18 per cent in December, retail inflation continued to be in double digit at 10.56 per cent.

These levels are much above the Reserve Bank's comfort zone of 5-5.5 per cent, inflation is showing some signs of easing in recent months.

Barun Jha in Davos
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