The RBI Governor, Y V Reddy announced the credit policy in Mumbai today. RBI has hiked the CRR by 50 bps to 7.5 per cent from 5 per cent. However, the other key rates including the repo and reverse repo rates have remained unchanged. (See: RBI raises CRR by 50 basis points to 7.5 per cent, other rates steady)

SBI Chairman OP Bhatt said that an interest rates revision is unlikely. CRR hike is an ''upfront attack on liquidity'', he added. He said that banks NIMs are seeing pressure.

"It was anticipated. If there is so much liquidity in the system and if you look at the last couple of weeks, the fact that there is so much liquidity - it''s sloshing in the system. And so much liquidity continuing to come into the system, some measures for continuing liquidity have become important. So in that sense, it was expected that there will be some measure, and the measures that they have chosen is to increase the CRR rate."

KV Kamath, CEO & MD of ICICI Bank has said that a CRR hike doesn''t necessarily mean hike in interest rates, though he added that CRR hike would mean a re-think on interest rates.

Kamath clarified that with the CRR hike, his bank would need to rethink and redraw their plans regarding lowering the lending rates.

However, he does not suggest an upward move. "I would not say that it is on an upward move because if we see stability in the deposits rates and or deposits rates decreasing, you may ask me, ''Why? Because of the liquidity situation?''

Liquidity continues to be good and the lending rates could hold. But banks would take knock because of the CRR hike and that will have to be factored in to the whole equation as we go along," Kamath said.

He agrees with the RBI that surplus liquidity needs immediate attention. He said, "Indeed surplus liquidity needs immediate attention. That could create inflationary pressures and you have the challenges of the global flows continuing unabated. So whatever measures have been taken to keep this in check are in an international context."

He agrees with the RBI that surplus liquidity needs immediate attention. He said, "Indeed surplus liquidity needs immediate attention. That could create inflationary pressures and you have the challenges of the global flows continuing unabated. So whatever measures have been taken to keep this in check are in an international context."

Meanwhile, Indranil Sengupta, chief economist, DSP ML also feels that bank interest rates would remain same. "If you saw the data on the sectoral deployment of credit, housing loans are down to 16 per cent YoY, from 45 per cent as of March ''06. So I think the retail lending cuts that have taken place in that segment, they have been currently packaged as festival cuts. But I think they are there to stay."

He predicts that economy is also beginning to soft land. "We are probably going to see growth somewhere in the region of 8.5-9 per cent rather than 9-9.5 per cent. So I think that the rates cycle will turn and probably a few months down the line, you will actually see rates moving off.

"The excesses that happened last year in deposit rates and the lending rates, especially in retail lending rates, though it have more or less begun to get corrected, they will stay corrected during the rest of the year. So they''ll probably be flat now and then with the easing bias as we go ahead," Sengupta elaborated.