Banks expect rates to remain unchanged till March
12 Jan 2010
The Reserve Bank of India has ruled out any rate hike till March, and assured banks that it would keep its policy rates unchanged until 31 March. He added that the interest rates would be expected to remain stable till June this year.
Though bankers discount any rise in policy rates such as repo and reserve repo as it would impact the fledging economic recovery, they hope the reserve ratio (CRR) would be hiked by 25-50 basis points in the RBI's forthcoming review of the annual monetary and credit policy on 29 January to check inflation by reducing liquidity.
While a marginal CRR hike would eliminate excess liquidity banks do not expecting any policy rate tweaking. They say a 50 basis point hike in CRR will suck out Rs21,000 crore of liquidity from the system.
About Rs90,000 crore of their excess funds have been parked by banks with RBI at its reverse repo window. The central bank sucks out liquidity from the system through its reverse repo window offering 3.25 per cent.
Currently CRR is pegged at 5 per cent.
The previous change in policy rate and CRR was effected in April.