CRR rates likely to rise further by another 25-50 basis points
By Neelima Shankar
Apr 13, 2010
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Towering inflation rates at a time when the economy is on its path towards recovery may force RBI to raise the policy rates as well as Cash Reserve Ratio (CRR) even further. This rise is most likely to take place on 20th April 2010 when the RBI is going to come up with the monetary policy for this fiscal, bankers 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," Prabhu said.

The RBI had raised CRR by 75 basis points in January this year. Following this many banks like ICICI and HDFC raised deposit rates on selected maturities. The apex bank then hiked repo and reverse repo rates by 25 basis points in March this year.

The total inflation of the country now stands at 9.89 % a cause of alarm for the country.

The recovery shown by the economy is also likely to help the RBI in taking an exit route from its monetary stimulus, bankers 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," State Bank of India, Chief Financial Officer, S S Ranjan said.

Ranjan however said that the rise in policy rates is unlikely in the immediate future owing to the recent hike done by the RBI on the same. But a rise in CRR is very likely.


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