The RBI is to announce the monetary and credit policy for the first half of 2003-04 on Tuesday.
Brokers expect the central bank to lower the key bank rate. Some traders are punting on a cut of 25-50 basis points in the bank rate, which is currently at a three-decade low of 6.25 per cent.
A reduction in the bank rate is expected to drive bond yields lower. This will benefit banks as bond yields and prices have an inverse relationship.
Banks currently hold about 40 per cent of their total deposits as investments in government bonds. On Monday, State Bank of India, the largest commercial bank, edged up 1.22 per cent to Rs 282.95.
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