RBI likely to cut repo rate by 0.25%: NDTV Profit poll

The Reserve Bank of India (RBI) is likely to cut its key repo rate by 0.25 per cent at its mid quarter policy review, scheduled for March 19, an NDTV Profit poll has shown. The central bank is, however, expected to leave the cash reserve ratio (CRR) unchanged at 4 per cent.

The rate cut expectations come on the back of a decade-low economic growth, slowing core inflation and a commitment by the government to contain the fiscal deficit.

The RBI cut the repo rate -- the rate at which the RBI lends to banks -- by 0.25 per cent to 7.75 per cent in January after leaving it unchanged for nine months. The RBI at that time had cited sticky inflation as well as high current account and fiscal deficits as a deterrent for big cuts.

Of the bankers polled by NDTV Profit, 85 per cent expect a cut in the repo rate. The CRR -- - the portion of deposits that banks have to mandatorily park with the RBI --is largely expected to remain unchanged, although 25 per cent of the bankers polled expect a 25 bps cut in the CRR as well.

According to the bankers polled, there are some grey areas that may keep the central bank from cutting rates as the high and rising consumer price index (CPI) as well as the high current account deficit continue to be a concern. Retail inflation accelerated to 10.91 per cent in February from the previous month, government data showed last week. Consumer prices rose an annual 10.79 per cent in January.

India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, India, China and South Africa.

RBI Governor Duvvuri Subbarao struck a hawkish note last week, rejecting views of high inflation as a "new normal" for India and said many of the supply driven causes can be corrected.

(With inputs from Reuters)