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RBI likely to hike key rates 1.25% next yr: Credit Suisse

Last Updated: Friday, December 11, 2009 - 21:25

Mumbai: Expectations of better growth figure
and rising inflation might prompt the Reserve Bank to hike key
rates and the amount banks need to park with it (CRR) in 2010,
a Credit Suisse report today said.

"For 2010, we are pencilling in a 125 basis points increase
in the reverse repo and repo rates and an approximate 150
basis points hike in the CRR," the Swiss banking major said in
its report today.

Repo and reverse repo refers to the rates at which the
apex bank lends money to other lenders and vice versa.

The apex bank may take into account the improved prospects
of growth, early signs of bank credit growth and the likely
surge in the wholesale-price based inflation to begin hiking
repo rates in end-March or April 2010, it said.

According to the report inflation in the January-March,
2010 may rise to 7.5 per cent from 1.3 per cent at present.

It added that the apex bank may allow excess liquidity in
the system for sometime, by allowing a part of this to go
`naturally` into the economy in the form of bank lending.

"Hence, we think the RBI is likely to keep the CRR on
hold in December and is likely to raise it by 50 basis points
only at the end-January 2010 meeting or before end-March
2010," it said.

On the back of a faster growth in industrial production,
India`s GDP growth in FY`10 could be around 6.6 per cent year
-on-year, compared to the earlier forecast of 6.2 per cent, it


First Published: Friday, December 11, 2009 - 21:25
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