The Reserve Bank of India (RBI) will be having its first quarter policy review on July 30. A CNBC-TV18 poll says this will be one of those few policies where no action will be taken and rates will remain unchanged. But the event is awaited with eagerness and the Governor will be heard with rapt attention, reports Gopika Gopukumar of CNBC-TV18.
When will the squeeze end?
Both Ben Bernanke and Governor Subbarao have one thing in common. The market is keenly watching both the regulators for their exit strategy- one from a loose monetary policy and another from a tight liquidity policy. In Subbarao's case, the market feels he has used up all the ammunition which he had reserved for the July 30 policy.
In pause mode?
Majority of bankers and economists polled by CNBC-TV18 believe that Subbarao will leave repo rate and cash reserve ratio unchanged.
The vote is completely divided. About 60 percent believed that the repo will stand at 7.25 percent for the rest of the year. 10 percent think there will be a cut of 25 basis points, and 15 percent see a cut of 50 bps. Whereas, 15 percent of the sample expects a hike in repo rates.
The market is also divided on the growth outlook for the economy. Around 55 percent feel that the central bank will stick to the old estimate of 5.7 percent; 45 percent believe that it will be revised to 5 percent.
Professional brokerages have all revised their estimates lower towards 5 percent; concomitantly, some have said credit growth too will fall to 10-12 percent.
It was also deduced that 80 percent of the respondents expected no revision in credit and deposit growth. But they do not see RBI revising the full year credit growth forecast of 15 percent and deposit growth forecast of 14 percent.
Bankers decision to raise or not raise rates after the policy will depend on how "temporary" the governor says his tightening steps will be.
Consequently 45 percent of those polled do not expect banks to hike lending and deposit rates any time soon. 35 percent say yes banks will hike rates and 20 percent felt that they could not judge.