The Reserve Bank is likely to retain key policy rates in its annual monetary policy to be unveiled on Tuesday and it may also ask banks to step up lending and pass on the benefit of earlier rate cuts announced by the central bank.
Concerned over the slow pace of the credit flow to the economy reeling under the impact of the global slowdown, the Reserve Bank will impress upon the banks to step up lending to affected sectors.
The Reserve Bank has given enough indications to banks for easing rates time and again. Earlier this month at a seminar RBI governor, Mr D. Subbarao had said: “The response of banking system (to the policy actions) has been positive...but banks are yet to respond as much as warranted by the policy.”
According to UCO Bank chairman and managing director, Mr S.K. Goel, “I think RBI is unlikely to alter policy rates. It would rather maintain status quo this time.” He, however, expects the apex bank to advise all banks to ease rates in consonance with policy rate cuts.
The repo, the rate at which Reserve Bank lends short-term funds to commercial banks, has been reduced from nine per cent in October to five per cent now.