Taking a cue from the RBI, market leader State Bank of India (SBI) promised to take a call on reducing interest rates tomorrow.
Shedding its nine-month long hawkish monetary policy stance, the RBI cut short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent. The other key rates have been adjusted accordingly.
These initiatives are aimed at encouraging investments, supporting growth and anchoring inflationary expectations, RBI Governor D Subbarao said while unveiling the third quarter monetary policy review here.
Within hours of policy pronouncements, state-owned IDBI Bank and foreign lender Royal Bank of Scotland (RBS) reduced their interest rates. While the IDBI slashed lending and deposit rates by 0.25 per cent, RBS announced 0.75 per cent cut in lending rate.
ICICI Bank CEO and Managing Director Chanda Kochhar said: "There is going to be a transmission on the lending side, while on the deposits front, we will wait and watch. There is going to be a lag... The cuts are positive for EMI."
The industry too appeared satisfied with the rate cut hoping that it would boost demand and promote growth.
On future policy action, RBI said it would depend upon fiscal situation and growth-inflation dynamics, which to a large extent, will be conditioned by the budget to be presented by Finance Minister P Chidambaram on February 28.
RBI has lowered the growth projection for the current fiscal to 5.5 per cent, from 5.8 per cent estimated earlier. The economy grew by 6.5 per cent in 2011-12.
