HDFC's Keki Mistry says repo rate cut likely soon

The largest mortgage player HDFC today said there is a possibility of the Reserve Bank reducing the repo rate, or the rate at which banks borrow from the central bank, in the immediate future, but a cut in CRR in unlikely.

"The amount of funds being raised by banks through the liquid adjustment facility has come down and is now hovering around Rs 70,000-90,000 crore, which is not significantly higher than the Reserve Bank's comfort level of Rs 60,000 crore," HDFC chief executive Keki Mistry told reporters here today.

"So, any injection of liquidity (through a CRR cut) is unlikely. However, reduction in interest rate during this quarter is very much expected," he added.

Mistry, who was talking to reporters on the sidelines of a BSE function, however, said timing of the cut in repo rate is difficult to predict.

Mistry also said recent IIP (index of industrial production) numbers make a strong case for reduction in policy rates.

On Thursday, the government reported a muted 4.1 per cent growth in the February factory production data, which was less than market expectation.

Also, the January IIP numbers were massively revised downwards to 1.1 percent from earlier reported 6.8 percent, indicating a sharp downward spiral of the economy.

The RBI since January 24 has brought down the cash reserve ratio of banks by 125 bps in two instalments as the liquidity crunch in the system had sniffed at Rs 2 trillion mark, while it has not lowered the lending rates between March 2010 and October 2011, when it had raised lending rates to 8.5 percent to fight a stubbornly high inflation, which in February stood at 6.95 per cent.

Referring to property prices, Mistry said there is less possibility of any fall in property prices as demand remains robust.

He also said the rising income levels along with lack of proper infrastructure development will keep property prices remain at the present high levels.

HDFC reported a 10.1 per cent rise in net profit to Rs 981.3 crore for the December quarter of the last fiscal compared to Rs 890.9 crore during the same quarter of the previous year. Its total income rose 35 per cent to Rs 4,472.5 crore from Rs 3,321 crore.

Source: Financial Express