RBI to tamper with repo rate now

Author: Neha Dhamija

Despite RBI and Government coming up with a monetary relief package of Rs. 2,00,000 crore, stock markets are unaffected by it. RBI has now decided to correct things by working on repo rate, after the attempts with CRR seem to be unsuccessful. Consequently, in the coming review of credit policy, the central bank is expected to announce a cut in repo rate that can be up to 25-50 basis points. This comes after a recent hike of 50 basis points in the credit review policy on 29 July. The possibility was not ruled out by Suresh Tendulkar, Chairman of Prime Minister’s Economic Advisory Council.

Previous efforts of RBI to improve the situation include infusion of Rs.1,60,000 crore by changing CRR and SLR constraints on Banks, repo window of Rs. 20,000 crore to help mutual funds meet redemption pressure and Rs. 25,000 crore as debt waiver scheme.
	Goldman Sachs also feels that in this era of financial turbulence, RBI’s attempts should be more directed at increasing financial stability and enhancing growth prospects, rather paying attention towards inflation. Within a single month last year, IIP (Index of Industrial Production) sank to 1.3% from 10.9%. Such a sudden and abrupt fall is a cause of greater worry.