The Centre for Monitoring Indian Economy (CMIE), an Institute on economic research in India, has said that it expects the average base rate to remain same for the next few months, at least until the next quarter. Base rate is the rate below which banks cannot extend credit.Meanwhile, the monetary regulator, Reserve Bank of India, has kept key policy rates unchanged in the Mid-Term Monetary policy review, released on 18 June,2012.
CMIE said in a bulletin, "We expect average base rate to ease only by the third quarter of 2012-13." It further added, "Base rate remained almost unchanged in June at 10.33% compared to that of May. It had eased by 12 basis points in may as many PSU banks cut lending rates by 25 basis points (100 basis points = 1%) in response to a 50 basis points repo rate cut by RBI in April. However banks will be unable to bring down base rates any further as deposit growth has been persistently lagging behind credit growth.'
It should be noted that growth in deposits have been slow, standing at 14 percent in the first quarter of this fiscal. On the other hand, advances were growing at 17 percent. Taking this into account, the bulletin also said, "This indicates capital outflows as the rupee depreciated sharply in the first quarter of 2012-13,"