‘RBI may hike repo, reverse repo rates by 25 bps’

Financial service provider SMC Global Securities has said the Reserve Bank may hike the key rates by 25 basis points in its policy review tomorrow.

“With series of RBI actions and rise in commodity prices, India Inc witnessed pressures on margins ...,” the SMC Group Chairman and Managing Director, Mr Subhash Chand Aggarwal, said in a statement here today.

Mr Aggarwal said this hike in short-term lending (repo) and borrowing (reverse-repo) rates is expected to be last in series. Since March 2010, the central bank has raised the repo and reverse-repo rates seven times to check inflation.

He said that the balancing growth with inflationary expectation would be a difficult task for the RBI.

Inflation, which inched up from 8.23 per cent in January to 8.31 per cent in February, was much above the comfort level of 5-6 per cent.

He further said that the decline in industrial production and the RBI’s steps could pose a threat to the growth and demand.

Industrial growth slowed down to 3.7 per cent in January this year compared with 16.8 per cent expansion in the year-ago period, dragged down by the poor performance of the manufacturing sector, particularly capital goods.

The repo and reverse repo rates now stand at 6.5 per cent and 5.5 per cent, respectively.