Rising inflation rates when the economy is on the way of recovery may pressurize RBI to hike the policy rates along with Cash Reserve Ratio (CRR) still more. This increase is most likely to occur on 20th April 2010 when the RBI is set to introduce the monetary policy for this financial year, bankers said.
Prabhu said, “They (RBI) are likely to hike the rates by anywhere between 0.25-0.5 per cent as the inflation situation warrants monetary action. I do not expect lending rates to go up immediately as the liquidity in the system is enough to absorb even a 0.25 per cent rise in key-rates”.
The RBI had hiked CRR by 75 basis points in January this year. Subsequently many banks such as ICICI and HDFC increased deposit rates on certain maturities. Later on the apex bank increased repo and reverse repo rates by 25 basis points in March this year.
Today the total inflation in the country is 9.89 % a reason for panic in the country.
The economic recovery is also expected to assist the RBI in exiting from its stimulus policy, bankers said.
S S Ranjan, State Bank of India, Chief Financial Officer said, “I expect that the cash reserve ratio will be hiked by 0.25 per cent as the focus of the central bank now is to bring down inflation”.
But with this, it is anticipated that the personal loanswill tend to become very expensive.