Interest Rate Cut 'Quite Possible' in June: StanChart

EMIs or equated monthly instalments on housing, auto and other loans may come down from June as the Reserve Bank of India or RBI is likely to go ahead and cut interest rates in its bi-monthly monetary policy review, which is scheduled in the month of June.

Samiran Chakraborty, chief economist with Standard Chartered, told NDTV that the RBI may go ahead and cut interest rates in June which would likely result in banks cutting the lending rates for consumers.

"If you look at inflation trajectory, it appears that rate cut in June is quite possible. In the last couple of months, the inflation trend has been lower than expected and that should give Reserve Bank of India some comfort to go ahead and cut interest rates."

"With most of the central banks cutting rates may be the time is ripe for Raghuram Rajan to cut rates. From the global perspective, we saw 25 central banks cut interest rate in the first quarter. We are in a phase where the interest rate cutting will not be taken negatively by the global investors," Mr Chakraborty added. 

However, Mr Chakraborty said the central bank would take some things in consideration before cutting the repo rate - the rate at which the central bank lends short-term money to banks.

"Couple of things will have to be taken into account, if you look at pre-conditions for a rate cut by the central bank, first is the pace of reforms. It appears that the Goods and Service Tax Amendment (GST) and Land Acquisition Bill will be sent to select committee which may halt the pace of reforms momentarily and should remain a concern for the RBI."

"And globally the reflation trade is going on where in people are getting uncomfortable about the commodity prices going up. May be the RBI want to see through this phase of commodity price up move before deciding on the next rate cut. But still on balanced view we think that chances of rate cut in June are quite high," Mr Chakraborty said.

The RBI has cut the repo rate by 50 basis points or 0.5 per cent in two moves since January, to 7.5 per cent. But so far, citing the high cost of funds, Indian banks have only trimmed their own lending rates, with the country's largest bank, State Bank of India, cutting just 15 basis points or 0.15 per cent.

Meanwhile, stressed borrowers and slow credit growth will force domestic commercial lenders to yield to pressure from the RBI and do more to pass on lower policy rates, analysts at domestic ratings agency Crisil said on Tuesday.

Kishor Ostwal, CMD of CNI Research, said that he expects the central bank to cut interest rates by 50 basis points or 0.50 per cent. He also said that after the third rate cut by China in six months, hopes of the RBI to cut rates are on the rise.

(With inputs from Reuters)