A worrying slowdown in India's economy makes a cut in the central bank'...
MUMBAI - A worrying slowdown in India’s economy makes a cut in the central bank’s benchmark interest rate highly likely this week, but analysts say policymakers should also find ways to boost banks’ liquidity to ensure they drop their lending rates too.
Two-thirds of 66 economists polled by Reuters expect the MPC to wrap up on Thursday by cutting the repo rate by 25 basis points, but that survey was taken even before India released far worse than expected economic growth numbers, so expectations for a cut have probably hardened. State Bank of India, the country’s largest lender by assets, has cut its key lending rate by only 10 basis points in response to the 50 bps cuts by the RBI.
“Liquidity woes in banking system are far from over,” said Lakshmi Iyer, Chief Investment Officer at Kotak Mahindra Asset Management Company. New Finance Minister Nirmala Sitharaman is due to present a budget on July 5 that many analysts expect to be expansionary, though the she cannot afford to let the deficit slip too much.
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