"The focus is on restructuring. Finance
ministry is actively engaged with RBI
on this. In principle, the idea that there may be a restructuring required, is well taken," Finance
Minister Nirmala Sitharaman had said last week.
Besides, the central bank is expected to issue directions regarding the loan moratorium which is coming to an end on August 31 amid bankers opposing further extension of this facility on concerns over its misuse.
The fast-changing macroeconomic environment and the deteriorating growth outlook necessitated off-cycle meetings of the MPC -- first in March and then again in May 2020.
The MPC has cumulatively cut the repo rate by 115 basis points over these two meetings, resulting in total policy rate reduction of 250 basis points since February 2019, with an aim to boost economic growth.
The central bank has been taking steps proactively to limit the damage to the economy caused by the pandemic and subsequent lockdowns.
As per a research report by SBI, banks have cut rates on fresh loans by 72 basis points, the fastest transmission ever recorded.
SBI has cut by an equivalent 115 basis points on its repo-linked retail loan portfolio.
Shanti Ekambaram, group president- consumer banking, Kotak Mahindra Bank, said the interest rate cuts have had little impact on demand stimulation or growth.
The Covid-19 pandemic is hurting both businesses and consumers alike and the uncertainty around when things will normalise has led to muted demand and supply disruptions, she said.
"Having frontloaded the rate cuts and with inflation still above the 6 per cent mark, the MPC may decide to wait and watch and take a pause in August to monitor India's progress in its fight against the virus both from a health and economic point of view," Ekambaram said.
The government has tasked RBI to keep inflation at 4 per cent (+, - 2 per cent). The central bank mainly factors in the Consumer Price Index (CPI) while formulating the monetary policy.
Higher prices of food items, especially meat, cereals and pulses, pushed the CPI-based retail inflation to 6.09 per cent in June. The inflation rate for July will be announced on August 12.
Experts are of the view that the MPC would maintain an accommodative stance on monetary policy in view of the fast-changing macroeconomic environment.
The monetary policy was in an accommodative mode even before the outbreak of Covid-19, with a cumulative repo rate cut of 135 basis points between February 2019 and the onset of the pandemic.