MUMBAI: Bank chiefs are likely to suggest that the Reserve Bank of India (RBI) should cut policy rates in view of the slowdown in the demand for loan, at a meeting to be chaired by Deputy Governor Subir Gokarn on Tuesday. The customary pre-policy meeting will help the RBI gauge bankers' assessment of the economic growth and liquidity conditions ahead of its next monetary policy review on January 24. The meeting assumes significance in the context of the current debate on whether the RBI should give importance to growth over inflation. The economy grew by 6.9% in the September quarter, lower than the 8.5% a year ago. At the same time, headline inflation is around 9.11%, higher than the 7% the central bank had targeted for March 2012. "A 25 bps rate cut could make a lot of difference to improve the sentiments in the economy, which has been low for quiet some time now," S Raman, the chairman and managing director (CMD) of Canara Bank, told ET. The CMD of Punjab National Bank, KR Kamath, also aired similar views. "A rate cut is one of the measures that will help revive sentiments in the economy. It may be a signal of other things to follow," he said. The RBI raised interest rates since March 2010 to tame inflation and paused for the first time in its last policy statement in December. Every quarter, RBI holds an interactive session with the chiefs of select banks to understand their views on various issues like credit growth, liquidity conditions and interest rates. Bankers are expected to urge the RBI to cut policy rate as they witness a slowdown in the demand for loan. Credit has grown 17% on a year-on-year basis as on December 16, as against 23% a year ago. Bankers have attributed the slowdown in demand to rising interest rates and input costs, promoting corporates to delay their expansion plans. Aggregate deposits has risen 18% on a y-o-y basis .
ET
