Mumbai: Ratings agency ICRA says the Reserve Bank of India (RBI) may consider a cut in the cash reserve ratio (CRR) by up to 0.50 per cent in its forthcoming monetary policy but felt credit growth is unlikely to get a boost because of it.

"In light of the seasonal pick-up in credit demand, the Central bank may consider a further reduction in the CRR by 25-50 bps to support economic activity," it said in a note.

Reserve Bank Governor D Subbarao will, however, not touch the policy rate or the repo, rate at which RBI lends to banks, on October 30 when he unveils the half-yearly monetary policy because headline inflation continues to be elevated at 7-7.5 percent, the agency said.

"With headline inflation expected to average 7.5-7.7 per cent in the current fiscal, the space available for further monetary easing is likely to be limited to around 50 bps over the remainder of 2012-13".

Pressure is growing on the RBI to cut rates and do its bit to prop up the sagging growth, especially following a slew of reform measures from the Finance Ministry which also included actions to curb the high fiscal deficit.

However, any cut in CRR is unlikely to help boost credit growth, ICRA said, adding inhibiting factors like high Government borrowings and muted deposit growth will make it difficult for the banking system to achieve the RBI's target of 17 per cent growth in advances.

"Even as more banks are expected to lower their base lending rates in H2, FY13, to improve credit growth and also partly pass on the likely benefit of monetary actions by RBI, non-food credit growth is expected to remain lower than the RBI's indicative growth projection of 17 per cent for FY13," it said.

Reacting to the recent RBI actions, especially the cut in CRR, some banks have slashed their base rates while many have announced a reduction in spreads in loan categories.

Banks' deposit growth has been slow during the fiscal and has also been impacted by a Finance Ministry's advise not to go in for high-cost bulk deposits, ICRA said.

On inflation, the agency expects the headline number to shoot up to 8 per cent by December on high crude prices and the rupee volatility, but cool off in Q4 of the fiscal.

ICRA maintained its GDP growth estimate of 5.7 per cent for FY13 as against 6.5 per cent last fiscal.


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