India's apex bank might offer more rate-cuts although they have cut rates aggressively since the economic crisis hit the country, reported the PTI quoting Goldman Sachs.

Goldman Sachs Economist Tushar Poddar reportedly said in a research note that RBI may cut the CRR rate by 150 basis points by mid-2009. The global financial services firm said it expects the RBI to continue with limited quantitative easing by purchasing government securities to help maintain liquidity, fund the deficit and keep yields from ratcheting up sharply.

Poddar said that the large-scale quantitative easing, by monetizing the deficit, could create a large monetary overhang that could lead to uncontrollable inflation rates when demand returns. He also said that the apex bank could transfer about $20 billion deposits in a phased manner that are sequestered under Market Stabilization Scheme to government accounts and finally the bank could purchase government securities and thereby release liquidity into the system. He also said that monetizing the deficit, even though on a limited scale, would pressurize Indian rupee and weaken it in the near term.

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