Reserve Bank of India may opt for CRR cut

The RBI is likely to remain on hold at its bi-monthly monetary policy meeting on June 2. Although production data remains anaemic, inflation is likely to perk up in May as the effect of crop loss due to unseasonal rain becomes manifest. 

The RBI may prefer to wait for one more data print to ensure that inflation maintains the desired trajectory before implementing a rate cut. However, the possibility of a cut at the forthcoming meeting has risen given recent statements in support of one by the Finance Minister and the Chief Economic Advisor. The RBI may consider cutting the CRR by 50bp in an effort to prompt banks to pass on rate cuts, expects Societe Generale.