The Reserve Bank of India (RBI) would further cut down key policy rates with inflation continuing its downward trend, Punjab National Bank Chairman and Managing Director K C Chakrabarty said.
There is scope for further reduction by the RBI and even banks have room to lower their rate at a time when inflation is easing on week-on-week basis, he said on the sidelines of India MSME summit.
For the week ended January 31, inflation fell to over a 12-month low of 4.39 per cent, raising expectations of further cuts in policy rates by the RBI.
He said, "The Reserve Bank gives the signal, it's only when the banks cut the rates, then it makes the real difference."
The third quarterly review of monetary policy has observed that most banks have reduced interest rates to some extent, but there are some that are yet to do so.
Beginning this month PNB reduced its benchmark lending rate by 50 basis points to 11.50 per cent.
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The bank also reduced interest rates on home, education, car as well as personal loans by up to 50 basis points from February 1.
The RBI, since mid-September, has aggressively cut policy rates and reserve ratios, injecting over Rs 4,00,000 crore funds into the system, signalling a soft interest rate regime since Lehman Brothers went for bankruptcy.