The Reserve Bank of India left its key interest rates steady on Tuesday, saying banks still had to pass on the benefits of previous cuts, but analysts expect another reduction in coming months to shore up the slowing economy.Asia's third-largest economy is poised to grow at 7 percent or less in 2008/09, its slowest in six years, the central bank said in its quarterly review, as a global downturn following the financial crisis hurt the economy much more than expected.
"To arrest the moderation in economic growth, it is critical that banks expand the flow of credit to productive sectors of the economy and do so at viable rates," the central bank said.
Since the global financial crisis really hit India hard last September, the Reserve Bank of India (RBI) has cut its short-term lending rate by 350 basis points and slashed reserve requirements to keep credit flowing, while the government has taken a slew of fiscal steps to stimulate the economy.
The central bank said there was now clear evidence of further slowdown as a consequence of global downturn and urged banks to do more in response to its rate cuts.
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