Lack of liquidity forces banks to raise rates; RBI may maintain status quo

One reason why SBI had to raise rates so frequently is the rapid rise in bond yields

State Bank of India’s (SBI’s) continued hikes in deposit rates, three times since January, points to an interesting fact — interest rates have risen in the economy and it would remain that way, irrespective of what the Reserve Bank of India (RBI) decides about its monetary policy rate. 

Analysts expect the central bank to keep its policy rates unchanged on April 5 and also probably for the rest of the calendar year. Ideally, what the central bank does, the commercial banks should follow. But that is hardly the case in the Indian banking system where transmission of policy decisions is a