According to experts, the Reserve Bank of India (RBI) may further cut the key policy rate repo by 0.25 percent in the upcoming monetary policy review to revive the economy that is suffering from the outbreak of Corona virus. A three-day meeting of the Monetary Policy Committee (MPC) headed by RBI Governor is scheduled to begin on August 4 and an announcement will be made on August 6.
The central bank is continuously taking steps to limit the damage to the economy and the impact of the lockdown from the outbreak of the Kovid-19 epidemic. Earlier, the MPC met in March and May 2020, in which the policy repo rates were cut by a total of 1.15 percent.
ICRA Principal Economist Aditi Nair said, “We are expecting a 0.25 percent reduction in the repo rate and 0.35 percent in the reverse repo rate.” “There is a possibility of 0.25 percent cut or they can keep the rate unchanged,” said Rai.
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Nair further added that although retail inflation has exceeded the MPC target of two-six per cent, it is expected to come back within this range by August 2020. Industry association Assocham says that in view of the problems facing the industries, RBI should focus more on debt restructuring.
Assocham said immediate restructuring of debt is needed to prevent large-scale debt default in the industry. As is evident from the latest RBI report, restructuring is necessary for both banks and borrowers. Assocham Secretary General Deepak Sood said, “Restructuring of debt should be one of the main priorities of the Monetary Policy Committee. A public sector banker said there is enough cash in the system at the moment and rate cuts are being pursued. In such a situation, further reduction in rates will not serve any purpose.
