The Reserve Bank is unlikely to signal hike in interest rates in its forthcoming monetary review this week as economic recovery is still in the nascent stages, but may ask banks to keep more cash with the central bank to check inflationary pressures, say economists.
Moody's Economy.com said, "with the recovery in its early stages, the Reserve Bank of India is expected to refrain from hiking its twin policy rates this month."
However, RBI in its review on October 27 will raise the cash reserve ratio, the proportion of deposits that banks keep with the central bank, by 50 basis points to signal to the markets that it has adopted a tightening bias, it added.
Think-tank Economist Intelligence Unit (EIU) Research Director Manoj Vohra said the central bank is unlikely to signal hike in key rates in its monetary policy, however, it can raise the cash reserve ratio by 25-50 basis points.
"RBI will have a close look at the cash reserve ratio (CRR). It might hike CRR by 25-50 basis points," Vohra said. DBS Bank said the statutory liquidity ratio (SLR), the minimum share of bank deposits to be held in government bonds, cash, gold, could be hiked as early as next week by one per centage point.
"We do not rule out a one percentage point hike in the SLR rate to 25 per cent reversing the 1 point cut implemented in November 08," it said in a report.