RBI may cut key policy rates by 25 to 50 bps on January 29: Royal Bank of Scotland

MUMBAI: The Reserve Bank of India may cut its key policy rates by 25 to 50 bps during its quarterly monetary policy review on January 29, a survey by Royal Bank of Scotland said.

""Market is overwhelmingly poised for a rate cut, with more than 80 percent of the 109 respondents expecting 25 to 50 basis points (one basis points or bps is 0.01%) cut in repo and reverse repo in the review meeting,"" RBS said.

It may be recalled that inflation numbers released last week held steady at 7.2% adding to market expectation of a policy rate cut by the central bank.

"RBI has clearly teed up for rate cuts during the January-March quarter... This is rooted RBI's assumption of a gradually improving inflation picture during the course of the year, supported by assumed fiscal consolidation and continued progress on structural policies." said a report by HSBC after the inflation numbers were released earlier this month.

The RBS survey covered over 120 market participants including corporate clients, banks, insurance companies and mutual funds among others.

Majority of the participants also believe that the apex bank might cut policy rates by another 25 basis points before March 2013 and do an encore before December 2013.

Most respondents believe that this policy review marks the start of the easing cycle and expect it to continue in the subsequent reviews. Besides, most respondents do not expect any change from the current cash reserve ratio or CRR levels - the slice of deposits that banks need to park as cash with the central bank - in this meeting but do expect a 25 to 50 bps cut in CRR by December 2013.