Concerns over slipping economic growth this fiscal combined with the danger of its possible aggravation in the next, seem to have prodded the Reserve Bank to signal a lower interest rate regime aimed at propping up growth, economists said.The Reserve Bank on Saturday cut its repo rate by 0.5 per cent to 7.5 per cent while simultaneously slashing the cash reserve ratio (CRR) by 1 per cent to 5.5 per cent.With this, the apex bank has cut the repo rate by 1.5 per cent and CRR by 3.5 per cent since early-October."The Reserve Bank has sent an explicit signal to banks to lower their lending rates and that economic growth and financial stability have taken precedence over inflation control," Crisil Director and Principal Economist D K Joshi said.Despite the apex bank still harbouring concerns over inflation, it is dipping "sharper than expected" and this has given the RBI some flexibility to reduce rates, Joshi said.Banks were now expected to begin reducing both their lending and deposit rates."It (reduction) will be gradual, between 0.25-0.50 per cent. I see a clear lowering of the interest rate regime," Joshi said.Banks would first cut their deposit rates before amending their lending rates, Bank of Baroda Chief Economist Rupa Rege Nitsure said."I expect a 0.50 per cent cut in both over the next fortnight," she said.
