MUMBAI, Feb 23 (Reuters) - India's central bank governor
Duvvuri Subbarao endorsed the unanimous recommendation of all
external members of the bank to cut its policy interest rate
last month - the first cut in 9 months - minutes of the
quarterly meeting released on Saturday showed.
Four of the six members suggested that the Reserve Bank of
India (RBI) should reduce the policy rate by 25 basis points in
the third quarter policy review as global conditions were
favourable and marginal decline in WPI inflation provided room
for some monetary easing.
On January 29 India's central bank lowered its key policy
repo rate by 25 basis points (bps) to 7.75 percent
to help support an economy set to post its slowest annual growth
rate in a decade..
It also unexpectedly reduced the cash reserve ration (CRR)
, the share of deposits banks must keep with the
central bank, by 25 bps to 4.00 percent, to infuse an additional
180 billion rupees into the banking system.
The committee consists of seven external members, apart from
the governor and the deputy governors. The panel's role is
purely advisory, with the governor having the final say in
Two of the members felt that a 25 basis points reduction in
the repo rate alone might not induce banks to reduce their
lending rates and advised a cut in the banks' cash reserve ratio
(CRR) of 25 basis points to nudge the lending rates down was in
order. This would also enable loan rates to reduce more than
One of the other two members felt that the Reserve Bank
should make use of open market operations (OMOs) to manage
liquidity and keep the CRR unchanged. These two members
recommended a sharper reduction in the repo rate by 50 basis
points and use of OMOs to manage liquidity.
(Reporting by Indulal PM; Editing by Sophie Walker)