During the third-quarter review of the monetary policy, Reserve Bank of India mentioned slight rate cuts in January. New Year sets in and could bring some cheers to the bankers but this will be short lived as RBI won't go for any rate cut during the remaining part of the year.
With an easing of the inflation, RBI is expected to start the rate cut cycle in January with a 25 bps cut in the repo rate.
Most of the bankers expects repo rate cut between January and March, with the first cut on the third-quarter review of the monetary policy on January 29th. Mr. Indranil Pan, Chief economist, Kotak Mahindra Bank, said, "We are expecting a cut of 25 bps only at each phase. Most rate cuts will be at the earlier part of the year. We are expecting the first cut in January".
The first cut in repo cut by the Reserve Bank of India was on April, 17th this year. The next five meeting saw a status quo on rates, as inflation remained much above the comfort zone of the Reserve Bank of India. However, central bank reduced the cash reserve ratio by 175 bps to 4.25 per cent.
"I am expecting a 50 bps cut in 2013 and it will happen in the January-March period. After that RBI may pause," said Mr. A Prasanna, chief economist, ICICI Securities Primary Dealership.