INDIAN STOCK MARKET

Worried over the unabated inflation now at over 7 per cent, Reserve Bank is expected to take more monetary measures including a hike in key short-term rates in its credit policy on April 29, top bankers said.

A possible 0.25-0.5 per cent hike in the repo rate could be on the cards to supplement the 0.5 per cent cash reserve ratio (CRR) hike effected last week by the apex bank, they said.

Repo rate is the rate at which the RBI borrows from the banks while CRR is the amount of funds that the banks have to keep with the RBI.

"The first priority of the Reserve Bank would be to rein in inflation. A 0.25-0.5 per cent hike in repo rates is quite possible," Uco Bank's Chairman & Managing Director, S K Goel, said.

RBI had hiked CRR by 0.5 per cent to 8 per cent on Thursday to suck out Rs 18,500-crore liqidity from the banking system as a measure to combat ballooning inflation.

"The impound on Uco Bank with this CRR hike would be around Rs 400 crore while the loss of income would be around Rs 24 crore. This would have an impact on the lending surplus of the bank," Goel said.

The bank's Asset Liability Committee (ALCO) will meet on May 5 to take a decision on lending rates, Goel said.

Even a 0.25 per cent hike in short-term rates could force banks to pass on the burden to their customers through a hike in lending rates.