Research firm Crisil today said it expects Reserve Bank to reduce interest rate (repo) by 50-75 basis points in the current fiscal. "RBI's ability to cut repo rate will be constrained by fiscal slippage and inflation persisting above its comfort level. We expect RBI to cut the repo rates by 50-75 bps during 2012-13," it said in a statement. The Reserve of India (RBI) has hiked interest rate 13 times since March 2010 in its bid to tame inflation. Inflation remained high during 2010 and most of 2011. The rate of price rise in February was 6.95 per cent. The central bank is scheduled to announce the annual monetary policy for the current fiscal on April 17. The government's fiscal deficit has touched 5.9 per cent of the GDP in 2011-12 against the earlier estimate of 4.6 per cent of the gross domestic product (GDP). Crisil also said banks are "less likely" to pass on the entire reduction in repo rate to consumers to protect their margins as cost of funds is already high and non-performing asset are rising. However,"banks might selectively reduce spreads over the base rate for new customers in order to push credit growth," Crisil Director Industry Research Ajay Srinivasan said. The research company further said the liquidity conditions would remain tight over next few months on mismatch in deposit and credit growth while government's borrowing may be higher than budgetary estimates. Crisil said it expects government's borrowing in 2012-13 to be around Rs 5.2 lakh crore over the budgeted estimate of Rs 4.8 lakh crore.
