RBI expected to cut repo rate by 25 basis points next week

RBI expected to cut repo rate by 25 basis points next week

The Reserve Bank of India (RBI) is widely expected to announce a cut in repo rate next week for the first time in nine months.

Analysts are of the view that the government is finally playing its part to boost the economic growth that has declined to its slowest pace of in a decade.

Samiran Chakrabarty, chief of research at Mumbai-based Standard Chartered Bank, "The government has gone ahead with all the promises it had made 3 to 4 months earlier. There have been pretty substantial measures on the fiscal deficit front. To an extent, that will be comforting for the RBI."

The central bank's biggest concern, rate of inflation, is also on the decline. Wholesale price inflation (WPI) slipped to just over 7 per cent in December, lowest in three years.

Most economists expect the central bank to announce a cut of 25 basis points in its policy repo rate on Tuesday to 7.75 per cent. Cumulative cuts of 75 bps are expected by the end of September this year.

The last repo rate cut was announced in April 2012, when the central bank had announced a cut of 50 basis points along with a warning that there would be limited scope for further repo rate cuts.

Meanwhile, sources said the RBI would not wait for the Union Budget 2013-14 to issue final guidelines for new bank licences. According to sources, the central bank is preparing to announce final guidelines as soon as next month.

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