Monetary Policy Committee meeting starts Tuesday; may propose rate cut of 0.25%

The meeting on Tuesday will be the second of the MPC chaired by the Reserve Bank of India Governor Urjit Patel.

New Delhi: Monetary Policy Committee (MPC) will start its meeting on Tuesday amid expectations of at least 0.25 percent policy rate cut in order to tackle the impact of demonetisation move by the central government.

In its last outing, six-member MPC slashed the short term lending rate by 0.25 percent to 6.25 percent.

It will be the second meeting of the MPC chaired by the Reserve Bank of India Governor Urjit Patel.

RBI has reduced repo rate by 1.75 per cent since January 2015.

"Very difficult to predict now because the monetary policy committee now decides. Maybe, like 25-50-basis point cut is what everybody is expecting and no rate cut will be a bigger surprise," SBI Managing Director Rajnish Kumar said.

Canara Bank MD and CEO Rakesh Sharma said that with softening of inflation, "we expect that RBI may go for a 25-basis point rate cut in the upcoming policy".

According to Bandhan Bank Managing Director Chandra Shekhar Ghosh, there is expectation of a 0.25 per cent cut in repo rate as the October inflation has shown decline and the demonetisation drive is further expected to lower inflation in November.

In October, retail inflation stood at 4.20 per cent while wholesale inflation eased to 3.39 per cent.

"0.50 per cent cut is not feasible this time around as there are still uncertainties surrounding US Fed rate hike," Ghosh added.

Echoing similar views, IDBI Bank CFO R K Bansal said the central bank would ease the repo rate to 6 per cent.

"The new two quarters are very important and they would like to see the impact of demonetisation," Bansal said.

With PTI inputs