MUMBAI: A quarter of corporate India is expecting 0.25 per cent each hike in the mandatory cash reserves (CRR) and the key policy rates by the RBI at its forthcoming policy review, says an RBS India survey.
A large majority of these corporates are also keen on holding to the rupee, which means that they are comfortable with the continuing appreciation of the rupee, and expect the local unit to rise further in the coming months and settle at around 44 to an American dollar.
The survey was carried out early last week among the RBS' top corporate clients, banks, insurance companies and mutual funds to gauge the sense of India Inc in the run-up to the second quarter monetary policy review by the Reserve Bank on November 2.
"Around 75 per cent of the 108 respondents are expecting a 25 bps-one basis point is 0.01 per cent-hike in the repo and reverse repo (short term lending and borrowing rates) in the November policy review, while another 22 per cent expect a 25 bps spike in the CRR or cash reserve ratio, which is the amount of cash that banks park with the central bank to meet the prudential requirement," RBS (Royal Bank of Scotland) India managing director and head of markets Ramit Bhasin told newsmen while releasing the survey findings here over the weekend.
Bhasin further said these companies are also bullish on holding onto the rupee, which has been rising against the US dollar as also against the many other major overseas units for quite some time now, even if it goes past 44 mark.
However, they expect the local unit to stabilise around 45 against the dollar, with most of the clients expecting the rupee to settle around 44.75 by this December and 44.25 by next March.
The industry expects the repo touching 6.25 per cent by December 2010 and March 2011 up from the current 6 per cent, and reverse repo at 5.25 per cent from the present 5 per cent during this time. But a minuscule 11 per cent see these rates remaining unchanged, Bhasin added.
Significantly enough, none of these 108 corporates see the central bank cutting either repo, reverse repo or CRR rates by December or March even if inflationary pressures lessen, the survey said.
Food inflation for the week ended October 14 stood at a high 15.53 per cent while headline inflation for September ruled at an uncomfortable 8.62 per cent.
The break-up of the survey result is follows: 27 per cent see a 25 bps spike in the CRR rate while 71 per cent see the RBI leaving it untouched; 81 per cent see a 25 bps hike in the repo rate, 4 per cent expect a 50 bps hike and 15 per cent expect no change in this key policy rate on November 2; and when it comes to the reverse repo, 76 per cent foresee a 25 bps spike, 19 per cent no change and 5 per cent do not rule out a 50 bps increase in this rate.
It can be noted that since the economy started recovering from the impacts of the 2008-09 global financial meltdown from the last quarter of 2009 on the back of an expansionary monetary policy by RBI and stimulus measures by the government, RBI had effected five rounds of policy tightening measures.
The latest such measure was the mid-quarter review on September 16, when it hiked the reverse repo by 50 bps and repo by 25 bps to narrow down gap(more popularly known as the monetary corridor) between the lending and borrowing rates to 6 and 5 per cent respectively in order to reflect the real interest rate scenario in the economy as also to normalise its monetary policy measures.
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