RBI signals policy easing

The New Year may bring welcome cheer to auto and home loan borrowers as interest rates, which shot up during 2011, are poised to moderate.

The rates scaled the peak with base or minimum lending rates of all the banks going past 10 per cent and even the peak fixed deposit rates hovering at that level.

The Reserve Bank of India (RBI) hiked its policy rate seven times during the year, with both repo and reverse repo rates rising by 2.25 per cent. Repo is the short-term rate at which RBI lends to banks, while the reverse repo is the rate at which it borrows from banks. (See also: RBI hikes repo rate by 0.25%; deregulates savings account interest)

However, in the last review of its monetary policy, a fortnight ago, RBI left the rates untouched and indicated that these might come down in the future.

"While inflation remains on its projected trajectory, downside risks to growth have clearly increased... Further rate hikes may not be warranted," the mid-quarterly review of monetary policy said.

RBI governor D Subbarao said he could not really speculate on when the bank might start cutting rates.