A 100 basis point hike in the Statutory Liquidity Ratio (SLR) by RBI cannot be ruled out at its policy meet next week, DBS said in a note on Friday.
SLR, now at 24 per cent, is the minimum share of bank deposits to be held in approved government securities.
DBS said the hike in SLR would reverse the 100 basis points cut implemented in November 2008. The SLR was held steady for 11 years before last year's cut.
DBS also said it expects the first rate hike to come in January 2010.
"Our current forecast is for 200 basis points of hikes in 2010 though another 50-150 basis points of hikes would not come as a big surprise," said Ramya Suryanarayanan, economist at DBS in Singapore.
At its policy review on Oct. 27, the Reserve Bank of India (RBI), is expected to keep the benchmark lending and borrowing rates on hold, a Reuters poll showed on Friday.
DBS expects the economy to grow at 5.7 per cent in 2009/10 and 7.5 per cent in 2010/11.
Although industrial production recorded a double-digit growth in August, DBS says the current growth spurt is partly temporary and a result of pent-up demand, and should moderate soon.
On Wednesday, the prime minister's economic advisory panel chairman C. Rangarajan said Asia's third biggest economy would grow at about 6.5 per cent in 2009/10 and pick up speed the following year and grow 7 to 8 per cent.
The economy grew by 6.7 per cent in the last fiscal year, less than 9 per cent or more in the previous three years.
DBS expects the wholesale price inflation (WPI) to cross the reserve bank's tolerance level of 5 per cent by December and cross 6 per cent by March 2010.
"We believe that the underlying rate or core rate of inflation is around 5 per cent already and risks rising further, especially in the second half of 2010, as growth picks up further," the note said.
In early October, the central bank governor had said there was broad agreement India needed to wind back some of its easy policy stance, but there were risks if the move was mistimed.
Nevertheless, India would exit its accommodative monetary policy before advanced economies, he said.
SLR, now at 24 per cent, is the minimum share of bank deposits to be held in approved government securities.
DBS said the hike in SLR would reverse the 100 basis points cut implemented in November 2008. The SLR was held steady for 11 years before last year's cut.
DBS also said it expects the first rate hike to come in January 2010.
"Our current forecast is for 200 basis points of hikes in 2010 though another 50-150 basis points of hikes would not come as a big surprise," said Ramya Suryanarayanan, economist at DBS in Singapore.
At its policy review on Oct. 27, the Reserve Bank of India (RBI), is expected to keep the benchmark lending and borrowing rates on hold, a Reuters poll showed on Friday.
DBS expects the economy to grow at 5.7 per cent in 2009/10 and 7.5 per cent in 2010/11.
Although industrial production recorded a double-digit growth in August, DBS says the current growth spurt is partly temporary and a result of pent-up demand, and should moderate soon.
On Wednesday, the prime minister's economic advisory panel chairman C. Rangarajan said Asia's third biggest economy would grow at about 6.5 per cent in 2009/10 and pick up speed the following year and grow 7 to 8 per cent.
The economy grew by 6.7 per cent in the last fiscal year, less than 9 per cent or more in the previous three years.
DBS expects the wholesale price inflation (WPI) to cross the reserve bank's tolerance level of 5 per cent by December and cross 6 per cent by March 2010.
"We believe that the underlying rate or core rate of inflation is around 5 per cent already and risks rising further, especially in the second half of 2010, as growth picks up further," the note said.
In early October, the central bank governor had said there was broad agreement India needed to wind back some of its easy policy stance, but there were risks if the move was mistimed.
Nevertheless, India would exit its accommodative monetary policy before advanced economies, he said.
0 comments:
Post a Comment