The Reserve Bank Of India has taken a cautious stand by not lowering banks' cash reserve ratio, but the decision merely defers such a move and a CRR cut remains very much on the cards, says Sujan Hajra, chief economist at Anand Rathi Securities; "we were expecting at least a 50 bps CRR cut given the liquidity condition and also non-food manufacturing inflation (has eased to) below 5%," Hajra says. "We still expect the 50 bps CRR cut at or before the next policy," Hajra adds. The RBI could also lower its lending rate by 25 bps at the next review July 31, although it will only be a symbolic move to improve sentiment since transmission of rate cuts can't be effective under current tight liquidity conditions, Hajra says. The RBI unexpectedly stood pat on its policy rate as well as CRR worried by high inflation. Most economists had predicted a 25 bps cut in the policy rate.
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