See 25-50 bps CRR hike in Apr: Macquarie Capital Securities

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS StanChart expects 25-50 bps rate hike in April Expect more shocks in April from RBI: Experts RBI raises rates to tackle price pressures RBI ups repo, reverse repo rates by 0.25%

On Friday, the Reserve Bank of India (RBI) hiked the repo and reverse repo rate by 25 basis points (100 bps=1%). The new repo and reverse repo rate is 5% and 3.5%, respectively.

In an exclusive interview with CNBC-TV18, Rajeev Malik, Macquarie Capital Securities, discusses the RBI move and gives his outlook going forward.

Here is a verbatim transcript of the exclusive interview with Rajeev Malik on CNBC-TV18. Also watch the accompanying video.

Q: Inter-meeting move by the RBI after a long time, what happens at their next policy meet you reckon?

A: Over the next three months we have to see two things. One, another quarter percentage point upmove, as far as both repo and reverse repo rates are concerned. Also, about 25-50 basis point move on CRR (cash reserve ratio).

Bear in mind that RBI is not a typical central bank, in the sense that it often moves away from its schedule policy dates unlike most other central banks. So is it going to announce both these moves on April 20th? I would be surprised, but one of the two has to come through and the other would be quickly followed up thereafter. So before the end of June quarter, we should see another quarter percentage point upmove on rates and 25-50 bps on CRR.

It is striking that a lot of the commentary that you heard from Friday onwards, nobody seems to be talking about the relevance of an additional CRR hike. The only way RBI will get its monetary tightening to transmit in a more efficient manner is when liquidity is tightened further. That doesn't mean that it has to take the system into deficit, but it will have to cut back the excess further.