50 basis points rate cut by September

Ravi Dubey  |  India  |  10 May 16,17:48:40  |  

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.