The Reserve Bank of India could cut its repurchase auction rate, at which it infuses cash into the banking system, by 150 basis points more by mid-2009, Goldman Sachs said on Monday.
The reverse repo rate, at which the central bank absorbs surplus cash, could be cut by a further 100 basis points, the financial firm said in a note.
The Reserve Bank of India on Saturday cut both its key short-term rates by 100 basis points each to boost economic growth in the wake of a global credit crisis and recession in some major economies.
The repo rate is now at 6.5 per cent, and the reverse repo rate has been reduced to 5 per cent, its lowest in more than three years. Goldman expects a corridoor between 4 per cent and 5 per cent between the reverse repo and repo rate by mid-2009.
"The risks are clearly towards even more aggressive cuts as growth continues to falter, and Inflation declines rapidly", Tushar Poddar, economist at Goldman, said in the note.
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