Chairman of the largest lender of the country, State Bank of India has said that he expects Reserve Bank of India to announce another rise in policy rates by atleast 25 basis points in the upcoming monetary policy review. The main motive behind this hike would again be to tame the wildly towering inflation.
"Conventional wisdom says that there should be at least 25 basis points hike in interest rate" Bhatt said.
The upcoming review of monetary policy is scheduled on January 25, 2011.
"My personal view is that with things going on in the economy if you look at what has happened to the stock market, if you look at uncertainty and concerns...If interest rate is hiked at this point of time they might add to (problems)," he said.
He also added, "If you look at inflation, if the interest rate is hiked at this point of time it would not dampen inflation...My personal view is that interest rate can be hiked any time."
Bankers have requested RBI to bring down CRR and SLR in the coming review. Indian Banks Association CEO, R Ramakrishnan said, "We requested RBI to slash both the CRR as well as the SLR (amount of prudential reserves that banks keep in the form of government securities, bonds, etc), even though we admit that inflation is a big concern. We see inflation at 7 per cent by the fiscal-end. However, this is 50 basis points (bps) above RBI's estimates for this fiscal," Ramakrishnan said.