On the back of weakness in industrial sector, expect banks to cut their prime lending rates (PLR) by 75bp by March 09 and another 75 bp by 1HFY10.
Indian bankers who have been resisting a lending rate cuts – “only Delhi wants it”, arguing they have sufficient customers queuing up at their branches. Credit demand had indeed accelerated to 26.5% in November 08 from 22.8% last year with corporates shut out of the capital market and external commercial borrowings returning to banks.
Expect Delhi to be more amenable to a parallel reduction in public sector bank deposit rates with the November 08 assembly polls out of the way – and with a better-than expected performance.
Further one can expect RBI easing: 50bp rate and CRR cuts by January 09 and 100bp SLR cut by March 09.