RBI seen raising rates in next three months

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The Reserve Bank of India (RBI) is expected to increase its benchmark interest rates by the end of April, after holding them steady and hiking banks' reserve requirements in a quarterly policy review on Friday, a Reuters poll shows.

The survey found 22 out of 25 economists see the RBI raising its reverse repo and repo rates by up to 50 basis points in the next three months. That forecast is nearly unchanged from forecasts made in a Reuters poll of economists released on Jan. 22.

Twelve out of 23 forecast a further increase of up to 50 basis points in the cash reserve ratio (CRR) by end-April.

In Friday's review, the RBI said it would raise the CRR , the proportion of deposits banks need to keep with it, by 75 basis points to 5.75% in two stages in February.

It kept the reverse repo rate, at which it absorbs excess cash from the banking system, steady at 3.25% and the repo rate, its short-term borrowing rate, steady at 4.75%.

Of the 22 analysts who supplied a view for the end of 2010, 21 expected rates to have been increased from their end-April forecasts. The reverse-repo rate was seen ending the year between 3.5% and 4.75%, and the repo rate was seen at between 5.25% and 6.5%.

For the CRR, of the 20 analysts who supplied a view for the end of 2010, 12 expected it to be have been raised from their end-April forecasts. The CRR was seen ending the year between 5.75% and 7%.

One analyst expected the RBI to raise the statutory liquidity ratio (SLR), the proportion of deposits banks must invest in government bonds, by 50 basis points to 25.5% by end of April, from 25%.