The Reserve Bank of India (RBI) will announce its 6th bi-monthly monetary policy review of 2015-16 on Feb 2, 2016. The policy comes in the wake of major global and domestic economic headwinds viz. increased volatility in global stock markets, Chinese economic slowdown worries, falling crude oil prices, capital outflows from emerging markets, continued decline in domestic exports, resurgence in domestic inflation and the sharp decline in the local currency.

Care Ratings said, ''The RBI is unlikely to undertake any policy cuts in its coming policy. It is likely to remain watchful of the unfolding domestic and global economic and market conditions before initiating further rate cuts.''

Inflation after being benign has seen a rather steady increase in the last 4 months. Although inflation has been within the target set by RBI , the central bank is nevertheless wary of the buildup of inflationary pressure. Further interest rate actions would only be after monitoring the trajectory of inflation viz. the progress of the rabi crop.

The rating agency further said, ''Moreover, with the Union Budget being on Feb 29, 2016, the RBI future policy moves and estimates will have to be calibrated based on the governments borrowings and spending programs.''

Of the Rs 6 trillion of targeted borrowings for the year, the government has already raised Rs 5.53 trillion. Therefore, there is no major challenge for completing this programme.

''While a CRR cut has been spoken of in the market, the fact that the RBI has not been supplying funds though buyback of securities through OMO purchases is indicative that the central bank may not lower CRR as of now. We however expect the RBI to cut rates by a further 50 bps during 2016,'' it added.

The RBI in the last one year since Jan'15 has cut policy rates by 125 basis points to 6.75%, on occasions also in-between polices.