Lending Rates to Reduce, says economists

A rate cut is widely expected after the Reserve Bank of India (RBI) credit policy meeting in April 2008.

Economists say that the interest rates are likely to be reduce after the April policy announcement – triggered by Federal Reserve’s rate cut by 50 percentage points in the last week of January 2008.

Banks are expected to reduce the lending rates in the first quarter of the next fiscal after taking care of existing high-cost deposits that mature in March 2008.

According to media reports, Mr A. Prasanna, Vice-President, Fixed Income Research, ICICI Securities, said that domestic growth may slow down below 8 per cent in FY09 due to the global slowdown and the impact of monetary tightening. He also echoed the general sentiment that the RBI is likely to wait until the April policy before cutting the repo rate by 25 basis points.