Chairman of State Bank of India, Dinesh Kumar Khara expects the Reserve Bank of India to begin the interest rate cuts from the third quarter of 2024. Speaking to CNBC-TV18 in Davos World Economic Forum regarding the interest rate cut, Khara said that the monetary policy committee has clearly indicated that they would like to have the inflation rate of around 4% and we are somewhere around 5.5%.
He further went on to say that once the US Federal Reserve Bank starts to cut the interest rate, RBI will follow suit.
"What I expect is that going forward, there should be better situations to prevail and once the US Federal Reserve starts cutting interest rates, not before the middle of this calendar year, but maybe in the third quarter, we expect that there could be some interest rate cut which we might get to see," he said.
Also Read: RBI Monetary Policy December 2023: Repo rate left unchanged at 6.5% for the fifth time
CNBC-TV18 quoted Khara and said that RBI has asked banks to keep a check on their credit-deposit (CD) ratio to prevent overheating of the system. Credit deposit ratio tells how much of the money banks have raised in the form of deposits has been deployed as loans.
While the RBI has asked some banks to reduce the CD ratio to less than 75% mark, SBI's ratio stands at 66-67% on its domestic book and around 70% on its international book.
Khara on the rise of interest on India among global investors pointed out Indian economy's resilience as the major reason.
"Many of them are very keen to look at their supply chain relocation, and they want India to be a part of the supply chain. So, I think to that extent, India story is quite promising," he told CNBC-TV18
He further went on to say that India will attract more investors with its green initiatives in terms of solar, renewable batteries, electric vehicles (EVs).