Further rate cuts possible, says PM's economic adviser

Mumbai, Dec 23 (IANS) A senior member of the Prime Minister's Economic Advisory Council Tuesday said there was more room for rate cuts by the end of this financial year.

Maintaining that the central Reserve Bank of India (RBI) still had room to cut short-term lending rates, council chairman Suresh Tendulkar said: 'A one percentage point cut in both repo and reverse repo rates is desirable.'

He added that inflation is expected to decline to around 4-5 percent by the end of this fiscal.

RBI had cut repo and reverse repo rates early this month by a percentage point each to ease the liquidity crunch.

Inflation has dipped to the lowest in nine months at 6.84 percent.

Referring to continued resistance by some private banks to slash lending rates even after state-owned banks had done so, Tendulkar said: 'Private sector banks will (now) have to reduce their rates.'

He said banks were unwilling to lend despite being well capitalised.