IMF says policy rates in India still high

22 Apr 2009, PTI

WASHINGTON: The International Monetary Fund on Wednesday said that policy rates of the Reserve Bank are high, even as the central bank had cut the short-term lending and borrowing rates by 25 basis points each yesterday.

"Policy rates remain high in real terms in India and further rate cuts would help bolster credit growth," IMF said in its latest World Economic Outlook.

There is room for additional monetary easing in a number of economies, it said.

The RBI had yesterday slashed short term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 4.75 per cent and 3.25 per cent respectively.

To a query whether policy rates in India has hit rock bottom, RBI Governor D Subbarao today said "I will not believe that zero is the floor for us. The floor for us is certainly above zero. But where it is I wouldn't like to speculate here."

Post Lehaman Brothers crisis in September 2008, the RBI has reduced repo rate by 425 basis points from 9 per cent while reverse repo rate by 275 basis points from 6 per cent.

RBI has injected more than Rs 4 lakh crore into the system through various policy measures since then.