Bankers are bracing themselves up for at least a 0.25% hike in short-term rates in the Reserve Bank of India's (RBI) quarterly review of its credit policy next week, in a bid to contain inflation and unbridled credit growth. The short-term repo and reverse repo rates presently stand at 7.25% and 6% respectively, the former having been increased by 1% and the latter by 0.75% in the last one year.With inflation having already breached the 6% mark (a two-year high), well above the comfort level of 5.5% indicated by the apex bank, and with credit growth and money supply expanding robustly, they feel that the RBI will have no choice but to effect a rate hike.Some analysts fear that the real inflation might be much higher than 6% due to supply-side constraints of essential agri-products, some of which are not fully captured in the present methodology and weightage of the wholesale price index (WPI).Bankers, however, do not expect the apex bank to reduce the statutory liquidity ratio (SLR) now, though the government has brought in an ordinance allowing it to cut SLR below the present minimum level of 25%.Finance Minister P Chidambaram has already scotched speculation to this effect by indicating that the time was not ripe for reducing the SLR as inflationary pressures were ruling high.
