Reserve Bank surprises bankers, analysts

October 24th, 2008 - 4:54 pm ICT by IANS  

Mumbai/Chennai, Oct 24 (IANS) The central Reserve Bank of India (RBI) surprised bankers and analysts Friday by keeping its key lending rates unchanged in its mid-term review of monetary policy, after it had unexpectedly cut the repo rate earlier this week to bring liquidity into the system.”I’m surprised. I was expecting a cut in the repo rate and reverse repo rate. I guess the banking sector will see more pressure,” Religare Securities president Amitabh Chakraborty told IANS.

Chakraborty, however, said the downward revision of the economic growth rate forecast was expected, adding that the market has already factored in a growth rate of below 7.5 percent for the year.

S.P. Tulsian, an investment advisor said: “We were expecting some amount of reduction in CRR (cash reserve ratio), but the RBI has already done that in the past.”

CRR is the minimum balance a commercial bank must maintain against deposits.

Tulsian, nevertheless, said he believed there was a “bright possibility” of another round of interest rate cuts to further release liquidity.

Like him, HDFC chief economist Abheek Barua said he expected further repo rate cuts soon.

“In this policy financial stability has been the main priority. RBI has taken aggressive measures already, so now they would wait and watch depending on the market volatility.”

In Chennai, Catholic Syrian Bank Ltd chairman and CEO R. Venkataraman too said he expected more steps to boost liquidity.

“During the run-up to the half-yearly credit policy, RBI has taken several measures to boost liquidity. It has also said it would take necessary measures to boost liquidity if needed. We can expect support from RBI if needed,” Venkataraman said.

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