The Reserve Bank of India is likely to keep its benchmark lending and borrowing rates unchanged in its monetary policy review next week, but may start hiking them from April 2010, according to Macquarie Research.
"We maintain that the RBI would keep rates unchanged next week, and probably begin hiking them from April 2010," Macquarie research analyst Rajeev Malik said in a report.
"The RBI can also keep the cash reserve ratio (the amount of funds that banks have to park with RBI) unchanged on October 27, but may hike it before the next review in January 2010," Malik said.
At present, the cash reserve ratio (CRR) stands at five per cent, while the repo rate (the rate at which banks borrow from RBI) is at 4.75 per cent and reverse repo (the rate at which RBI borrows money from banks) stands at 3.25 per cent.
He said premature tightening would attract more capital inflows, which could complicate monetary and rupee management.
India's apex bank will announce its mid-yearly credit policy on October 27.
The research firm said credit offtake in the country remained less than desired while the trend in loan-deposit ratio was uninspiring.
Macquarie expected India's wholesale price index (WPI) inflation to shoot up to 7 to 7.5 per cent by end-March 2010, higher than RBI's estimate of five per cent.