The upcoming monetary policy review on July 27th is likely to bring with it an increase in its policy rates. According to bankers, increasing demand for credit coupled with towering inflation figures have left little option for RBI but to raise interest rates further.

It is expected by research houses like Nomura, Edelweiss and Crisil that there will be an increase in repo as well as reverse repo rates by atleast 25 basis points. Owing to the tight liquidity condition, it is expected that RBI will not make any hike in cash reserve ratio (CRR).

According to D K Joshi, chief economist of Crisil, the repo and reverse repo rates will rise by at least 25 basis points to 5.75% and 4.25% respectively.

As upto 2nd July 2010, banks have seen a srtrong rise in credit offtake at 21.7%. The annual credit growth as per the RBI had been projected at 20%. As compared to this, there has been a slow growth in deposits at 14.9%.

However, whatsoever decision the RBI takes, it would ensure the required availability of liquidity so that companies in need of it do not get affected.