'RBI may act ahead of policy to attack inflation'

Some Bankers expect Reserve Bank to take some pre-emptive steps even ahead of the annual monetary policy on April 29, to counter rising inflation, which touched to 7 per cent on March 22.

"There are expectations that RBI may take pre-emptive measures before the annual policy on April 29... The government has taken some steps which will take some time to show results," Indian Banks' Association Chairman MBN Rao told PTI.

RBI had stated in its policy that it could respond swiftly as and when required to ensure price stability, Rao said.

Echoing similar views, private sector Yes Bank Managing Director and CEO Rana Kapoor said RBI could tinker with key rates anytime, even before the annual policy.

"Inflation number has come as a shock... We expect 0.25 per cent hike in the repo rate and a quarter percentage hike in the cash reserve ratio," Kapoor said.

Though some bankers feel inflation spiralled due to supply side constraints and not overheating in economy, it could prompt the apex bank to take tight monetary measures like raising short-term lending and borrowing rates and squeezing money supply by raising the cash reserve ratio (CRR) to check inflation expectations.

Repo rate is the rate at which the Reserve Bank lends to banks against securities. CRR is the statutory cash balances banks maintain with the apex bank. A 0.25 per cent CRR hike would sterilize Rs 7,000-8,000 crore from the system.

"Anticipating a hike, we are seeing some adjustments like firming of deposit and lending rates," Kapoor said.