Repo Rate | Reverse Repo Rate | Cash Reserve Ratio | Crr Rate | Reverse Repo | CRR hike to have no impact across sectors: Experts

In its monetary policy announced on Friday, The Reserve Bank of India (RBI) raised the cash reserve ratio (CRR) for banks by a higher-than-expected 75 basis points. However, the key interest rates were left unchanged.

Reacting to the hike, bankers said that despite the CRR hike, they had no leeway to raise rates because nobody was demanding money much these days.

The banking sector index was down 0.1% at 11:20 am, after the central bank hiked CRR. The index was up nearly 1% before the policy.

n a knee jerk reaction to the announcement, the benchmark Sensex tanked over 300 points and broke the 16,000 mark, the benchmark 10-year bond yields rose 4 basis points and the rupee and stocks extended losses.

India Inc reacts

Gaurav Kapur, Senior Economist, ABN AMRO Bank: "The policy announcement of a 75 basis points CRR hike is largely in line with expectations. The surprise element is in the upgrading of the real GDP forecast for FY10 to 7.5% from 6%. That, along with an increase in the wholesale price index (WPI) inflation forecast to 8.5% for end March 2010, suggests that the RBI might not wait until the next monetary policy in April to raise policy rates. An inter-meeting rate hike looks imminent now."

Rupa Rege Nitsure, Chief Economist, Bank of Baroda: "This is along expected lines, but slightly more aggressive than thought of. We had expected that they would do something to control to the liquidity overhang which has potential to fuel inflation in the coming months, but I still feel this may not be very effective in controlling inflationary expectations as supply shocks have been quite severe and the demand-pull pressures are still on the weaker side in the inflation process. The next policy action would be at the annual policy, and that will be conditional upon the actual credit pick-up in the fourth quarter."

V Kumaraswamy, Chief Financial Officer, JK Paper: "As of today the banks are flush with funds and in the last few months there has not been too much of credit offtake. It is not likely (that rates will go up)."

HS Bharana, Chairman, Era Infra Engineering: "I don't think there will be any impact. There is a lot of liquidity in the market. It is not going to affect lending rates."

Rajeev Talwar, Group Executive Director, DLF Ltd: "There will be no significant impact of CRR hike on the real estate sector. Banks will absorb its impact."

Venugopal Dhoot, Chairman and Managing Director, Videocon India: “The consumer goods industry will welcome this as interest rates have not gone up. There is ample liquidity available in the system, even after the CRR hike. The rural market is growing and rural population has access to the banks. Since interest rates have not gone up and GDP projection has increased demand will continue to grow."

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