'RBI may cut short term rates to moderate capital flows'
Reserve Bank may send out a signal by reducing either the reverse repo or the repo rate by 0.25-0.5 per cent to moderate capital flows. Day in Pics
By PTI |
MUMBAI: Amid expectations of a cut in interest rates by the Reserve Bank after its quarterly review of monetary policy next week, a top official of Indian Banks' Association has said that apex bank may cut short-term rates by 0.25-0.5 per cent.
"Reserve Bank may send out a signal by reducing either the reverse repo or the repo rate by 0.25-0.5 per cent to moderate capital flows," IBA Chief Executive H N Sinor told reporters.
Large capital flows are expected in view of a rate cut of 0.75 per cent by US central bank early this week to prevent the economy from going into a recession.
Repo is the rate at which banks borrow from the Reserve Bank by pledging government securities while reverse repo is the rate at which the apex bank sucks out excess liquidity from the banks.
"Reserve Bank may send out a signal by reducing either the reverse repo or the repo rate by 0.25-0.5 per cent to moderate capital flows," IBA Chief Executive H N Sinor told reporters.
Large capital flows are expected in view of a rate cut of 0.75 per cent by US central bank early this week to prevent the economy from going into a recession.
Repo is the rate at which banks borrow from the Reserve Bank by pledging government securities while reverse repo is the rate at which the apex bank sucks out excess liquidity from the banks.
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The repo and reverse repo rates currently stand at 7.75 per cent and 6 per cent, respectively.
"We will have some impact if US goes into a recession and the difference between interest rates in US and India may drive large capital flows here," he said, adding that the quantum and timing of US Fed rate came as a surprise.
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