- The RBI increased the benchmark repo and reverse repo rates in two consecutive moves during the last two quarterly reviews. In the forthcoming policy statement the RBI will have to strike a balance between the tightening liquidity and the surging oil prices as well as the rising asset inflation.
- We do not expect the RBI to tinker with the cash reserve ratio (CRR) as the liquidity situation is easing out. Nevertheless the same may be taken up in the quarterly review of the policy some time in July 2006.
- The RBI may announce some more safety measures in relation to the banking sector’s exposure to the capital market and the real estate sector.
- The central bank’s inflation guidance for FY2007 is likely to remain at 5.0-5.5%.
Monetary policy review
The Reserve Bank of India (RBI) will announce the Monetary and Credit Policy statement for 2006-07 on April 18, 2006. We discuss below our expectations of the apex bank.
