Scope for cutting key rates: Adviser

8220;There might be a scope for reducing both the repo and the reverse repo. Unless they reduce the reverse repo it will be difficult. The reverse repo acts as a problem as banks park funds with the RBI,8221; Suresh Tendulkar,chairman of the prime minister8217;s Economic Advisory Council said on phone.

8220;So I think they will have to reduce both.8221;

Asked whether the RBI will cut rates in its policy on Jan. 27,Tendulkar said: 8220;Well,I think given their previous behavior RBI has always been cautious. Consequently,I will not be surprised if they don8217;t cut.8221;

8220;But certainly they will give some indicative perceptions on Tuesday.8221;

The repo rate,the key short-term lending of the RBI,stands at 5.5 per cent after being slashed by 350 basis points since mid-October.

The reverse repo rate is at which the central borrows short-term funds from banks. It stands at 4 per cent.

Tendulkar,who will release an update of the economy later in the day,said bank lending has to speed up and lending rates must come down.

8220;The banks are not lending and that is the bigger problem,8221; he said. 8220;Rates are not coming down as fast as one would have expected. Lending rates have to come down to boost both consumption and investment.8221;