The markets are abuzz with rumours that the Reserve Bank of India might soon announce an interest rate cut on the one hand, and that tax rates too could be expected to fall.
The first is a distinct possibility. This is because the banks are likely to be flush with deposits. They have already collected some Rs 5.45 lakh crore by way of incremental deposits – post demonetisation.
This figure could go up to Rs 9 lakh crore. Reduce from this the money that the banks will have to set aside as provisions for statutory liquidity ratios and deposits with government securities, and the banks could still be left with a net incremental deposit of Rs 6 lakh crore.
Thus money available for lending will be much more than before. So interest rates are bound to fall. Some banks have already reduced their interest rates marginally. A further reduction could not be ruled out.
