Nosediving of inflation to 6.84 per cent coupled with falling oil prices is likely to trigger more lending rate cuts up to one per cent by banks, economists said today.
"The current fall in inflation would put more pressure on banks to bring down their interest rates by additional one per cent across the board by March. There is a strong southward bias," Bank of Baroda Chief Economist Rupa Rege Nitsure told PTI here.
India's headline inflation fell to a nearly nine month low of 6.84 per cent mainly on account of cut in domestic fuel prices after nearly 20 per cent decline in the global crude oil prices and declining prices of vegetables, fruits, pulses and iron, steel items.
Many state-owned banks and a few private sector banks had slashed their prime lending rates after RBI's monetary measures rate and finance ministry's calls for immediate rate reductions.
Many private leading lenders including ICICI Bank, are yet to revise their rates and they may have to take a call now following the steep fall in inflation, Nitsure said.
Monetary policy makers in the Reserve Bank may now face different challenges if the pace of fall in the headline inflation continues in the remaining part of this fiscal, IDBI Gilts' Economist Amol Agarwal said.