RBI slashes interest rates further much ahead of monetary review

 The Dollar Business Bureau As expected, the Reserve Bank of India slashed the interest rates by 0.25% much ahead of the monetary review that was scheduled for April 7, 2015. The second surprise rate cut that brought down the repo rate to 7.5% is bound to spur the economy especially with the auto and home sectors eagerly waiting for the cut. With the falling global oil prices and dropping prices of food and the wholesale inflation turning negative in the recent months, bankers and economists were hoping for a fresh round of rate reductions especially with the Finance Minister, Arun Jaitley talking about his government being committed to fiscal consolidation in the Union Budget presented on February 28^th. In the last couple of months, concerns on fiscal deficit front have also eased, especially after the government mopped up Rs 22,577 crore through divestment of 10% stake in Coal India Limited, which was a record. While lowering the policy repo rate to 7.75 per cent from 8 per cent, on January 15, 2015, RBI had also said that further rate cuts would depend on inflationary expectations and improvement in the fiscal situation. So far, the government has realised over Rs 24,000 crore (Rs 240 billion) with just two disinvestment share sales, including SAIL’s Rs 1,719 crore (Rs 17.19 billion) late last year. It targets to raise a total of Rs 43,425 crore from disinvestment in the current fiscal. With the government’s fiscal situation likely to improve further with more disinvestments and a favourable economic situation, industry experts are hoping RBI may go for further easing in key policy rates during its scheduled policy review on April 7.  

This article was published on March 04, 2015.