With the ruling National Democratic Alliance government retaining power thanks to a landslide election victory, industry experts are hoping for a softer interest-rate regime.
The Reserve Bank of India will hold its second bi-monthly policy meeting for 2019 on June 6 and RBI governor Shaktikanta Das has indicated that he is keen on improving liquidity in the markets.
Regarding interest rates, he has called for more flexibility, with the central bank enjoying greater freedom to move them either way.
He said the rates need not be changed in multiples of 25 basis points, and could, for instance, be moved by 35 basis points to add nuance, The Times of India reports. A basis point is one hundredth of a percentage point.
Many economists feel a cut in rates is called for as growth momentum is slowing and inflation continues to remain benign. Sectors such as real estate and telecommunications remain stressed.
The banks are saddled with a sharp rise in non-performing assets. According to RBI data, system-wide bad loans of banks went up from 3.8% of the gross advances or 2.63 trillion rupees (US$37.8 billion) on March 31, 2014, to 10.39 trillion rupees ($149.6 billion) or 11.2% as of March 31, 2018.
Rate cuts are often contentious and it may be recalled that when the RBI carried out its second 25-basis-point rate cut of the year in April, two of its top officials had divergent views. While governor Das argued for a rate cut, deputy governor Viral Acharya disagreed.