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| No change in key rates expected, CRR may be hiked: Banks |
| BS Reporter / New Delhi Oct 27, 2009, 00:08 IST |
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The Reserve Bank of India (RBI) may leave the policy rates untouched when it reviews the monetary policy on Tuesday, HSBC India CEO Naina Lal Kidwai said on Monday. TY Prabhu, chairman of the Oriental Bank of Commerce (OBC), seconded her views. The bankers, however, agreed there might be a small increase in the cash reserve ratio (CRR) as the system was flushed with funds.
"The RBI governor is clearly concerned about inflation, while he fully understands that having expansionist monetary policy has been important to provide the stimulus we need. I expect the rates to remain flat. A little bit change in CRR is fine," she told reporters on the sidelines of an industry event.
Prabhu declined to comment on the possible action by RBI, but agreed there was no immediate pressure (on the RBI to increase rates) due to adequate liquidity in the system. “We expect the present policy stance to continue. Interest rates would remain at the present level for the next three to six months.”
OBC executive director S C Sinha said a 25 basis points increase could be expected in CRR but overall interest rates would remain soft because of comfortable liquidity situation.
Kidwai added that the monetary policy was not just meant for tinkering with rates and the central bank could revise rates even outside the credit policy if needed.
She said the economy had started recovering and some action could be expected around December.
HSBC is expecting India to grow at 6.5 per cent this year and 8 per cent in 2010-11.
Asked whether RBI was expected to revise its credit growth target of 20 per cent for 2009-10, she said the central bank might stick to the target while asking banks to lend more.
“It may push banks into lending. This is the time to loosen purse strings.”
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