Rate cut by Reserve Bank imminent says Royal Bank of Scotland

NEW DELHI: The Royal Bank of Scotland today said the economic indicators like softening of inflation suggests that key interest rates could be slashed sooner than later by the Reserve Bank of India.

Reserve Bank had kept the key interest rates unchanged while unveiling its fourth bi-monthly monetary policy statement for 2014-15 on September 30.

"I think the RBI is a very fine institution and it is their job to take a call on monetary policy, rate cut and inflation...but the indicators seem to suggest that rate cut would be sooner rather than later," the RBS's Country Executive Brijesh Mehra told reporters here.

According to him, one can argue that easing of inflation and less capital expenditure do indicate scope of interest rate cut by Reserve Bank of India.

The inflation measured in terms of Wholesale Price Index (WPI) touched a five year low of 2.38 per cent in September. Besides, retail inflation has also dropped to 6.46 per cent, the lowest since the new series of Consumer Price Index was released in January 2012.

The experts think that the slight tinkering in the key interest rate by RBI in its next bimonthly policy statement scheduled on December 2 will help in perking up economic growth as well as lowering the burden of home and other loan instalments.

About the impact of stable government on the economic growth, Mehra, "There are improvements in sentiments with definitive majority government at the centre and there are early signs of economic recovery."

He further said, "You will be bound to see uptick on the economic activity with majority government at centre. You cannot set up a Rs 5,000 crore project overnight. There will be transition period."

Mehra was in the capital to announce the RBS Earth Heroes Awards for 2014 which are given by the bank for various conservation activities by groups and people.