After slashing the requirement for banks to keep cash with the central bank (CRR) by 150 basis points, the Reserve Bank may now go for a cut in short term lending rate (repo) by 25-50 basis points to infuse further liquidity in the system, bankers said.

 
The central bank is scheduled to announce its mid-term monetary policy review on October 24.

 
The repo rate was last raised by 50 basis points to 9 per cent in the first quarterly review of the credit policy announced on July 29.

 
With liquidity crunch becoming a major issue in the system and inflation falling below 12 per cent mark, the RBI reversed its tight monetary policy recently.

 
In order to infuse about Rs 60,000 crore liquidity in the cash-strapped banking system, the apex bank had slashed the requirements for banks to keep cash with the central bank by 150 basis points.

 
The decision, taken on Monday and Friday ahead of the mid-term review, came into effect from Saturday.

 
According to the HDFC Bank Chief Economist Abheek Barua, a fall in inflation may prompt RBI to cut repo rate by 25 basis point in the mid-term review later this month.

 
Even the report, prepared by the US-based financial institution Citigroup, said that given the worsening global situation policy rates cut are not ruled out.

 
However, there are some who believe that for the time being RBI would maintain the key policy rates unchanged as growth in money supply is still about 21 per cent.

 
Besides, the government will also inject more funds into the system within 10-12 days through the supplementary demands for grants which will come up for approval before Parliament later this month.

 
"In about 10 or 12 days from today when the supplementary is passed (by Parliament), a substantial amount of liquidity will be infused into the market," Finance Minister P Chidambaram had said.