RBI to maintain its key rates
By Joseph Samson
Oct 20, 2009
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The Reserve Bank of India will maintain the same benchmark lending and borrowing rates in the quarterly policy review this month with a view to boost growth in the country.

Analysts do not expect the apex bank to change its repo rate, the rate at which it lends short term funds to banks or the reverse repo rate, the rate at which banks park their excess funds with the regulator bank.

However, some of them say that the bank is likely to increase the cash reserve ratio (CRR), the percentage of deposits banks are required to keep with RBI, by half a percentage point.

One analyst said that the RBI will increase SLR, statutory liquidity ratio, again. The RBI had reduced SLR by one percentage point as a part of its measures to sustain the global crisis after the collapse of Lehman Brothers.

RBI is expected to exit its accommodative monetary policy gradually, beginning in early 2010 since the inflation is also expected to rise gradually. Official data reveals that the pace of growth in the industrial output was the fastest in 22 months in August.

Annual inflation rose 0.92 percent in the first week of October picking up from the previous week's 0.7 percent.

Rupa Rege Nitsure, chief economist at Bank of Baroda said "RBI will wait for some more time for clarity on inflation figures. They would wait for growth to stabilise and would like to see demand-pull inflation having more influence on inflation rather than supply shocks."

She said that a high growth in industrial output was due to low statistical base but the inflation data was mixed and the exports were under pressure.


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