Mumbai: The Reserve Bank may go for another set of rate hikes in its quarterly review, to be announced on July 29, on back of soaring inflation, primarily fuelled by costly crude and commodity prices, rating agency Crisil said.
“I expect a further hike in the repo rate and CRR on July 29...given present conditions, we see the GDP growth this fiscal at 7.8 %,” Crisil’s managing and CEO, Roopa Kudva told reporters.
He added that while higher interest rates have already hurt the profitability of small and medium-sized corporates, companies have not shelved their investment plans despite a visible liquidity crunch.
In order to check inflation, which is inching towards a 13-year peak of 12%, RBI had effected a series of hikes in its key rates the repo (short term lending rate) now at 8.5% and Cash Reserve Ratio (the mandatory fund that banks must to keep with the apex lender) at 8.75%), thus forcing banks to jack-up their lending rates.
A high-interest rate regime coupled with economic slow- down are likely to push-up the retail bad loans of Indian banks in the coming months, Kudava added.
“We have seen retail NPAs at 2.4% so far but this may go up to 4-4.1% on account of higher interest rates and increased exposure to high-risk customers,” she said.
Steps taken both on the monetary and fiscal side to contain inflation may help to cool it by the fourth quarter FY 09, he said, adding, “the average inflation rate is likely to be 8.5-9% in FY 09.”