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March 11, 2002 | 1350 IST
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Bank rate cut could happen any day, says RBI

A reduction in India's benchmark bank rate, widely expected by bond traders and analysts, could take place any time, a senior central bank official said on Monday.

"A bank rate cut, as (Governor Bimal) Jalan says, can be any day, any time," Reserve Bank of India (RBI) Deputy Governor Y V Reddy told reporters on the sidelines of a conference of bond traders in Bangkok.

Reddy said the RBI's annual policy would be released in the second half of April.

Bond traders and analysts have been speculating on a cut in the bank rate, the key signalling rate of the central bank, from its current level of 6.5 percent for several weeks.

Those hopes were reinforced by a reduction in interest rates on state-run public savings schemes announced in the federal budget on February 28. The RBI cut its repo rate, the benchmark for short-term money market interest rates, in the first week of March by 50 basis points to 6.0 per cent.

Reddy reiterated that heavy government borrowings limited the effectiveness of the Credit and Monetary Policy.

"For a rate cut, domestic factors are more important although we watch international developments also," he said, when asked whether a US economic revival and possible change in monetary policy by the Federal Reserve could impact the RBI's policy.

Some traders and analysts say that early signs of US economic recovery could lead to a change in the US Federal Reserve's easing monetary stance. The Fed cut rates 11 times last year by a total of 475 basis points.

The Rediff Budget Special

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