50 basis points rate cut by September
The Reserve Bank of India is likely to cut lending rates by 50 basis points by September amidst indications that the central bank will ease liquidity to support recovery, said a report by Bank of America Merrill Lynch.
Merrill Lynch observes that, with RBI committing to inject Rs25,000-30,000 crore a month, the money markets should ease to a seasonal surplus by June. This should catalyze lending rate cuts in the April-September industrial slack season.
The Bank has said that 10 yr G-Secs yields may come off to 7.25% by September, prompting banks to bring down rates. Non-performing assets may peak in the March quarter, although asset quality pressures may persist through Financial Year 2017.
The report states that RBI may inject $50 Billion of reserve money, including Rs 50,000 crore towards neutral liquidity, in FY 17.
Report Says –
50 basis points lending rate cut by Sept 1 in wake of RBI’s commitment on liquidity.
25 bps Repo rate cut may come on August 9
10-15 cut by banks in April as the money market liquidity deficit was a high of Rs 100,000 crore.
17.5% excess supply in the loan market estimated in FY17 due to sufficient liquidity in the market.