RBI may increase key interest rate by 25-50 basis points

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RBI may increase key interest rate by 25-50 basis points says HDFC Chairman

Jan 13,2011

India's central bank is likely to raise key interest rate by 25-50 basis points when it reviews the monetary policy later this month, said the chairman of the country's second largest private lender HDFC Bank Thursday.

"The RBI may be looking at an increase, at 25-50 basis points," said Deepak Parekh, chairman of the HDFC Bank, on the sidelines of 5th Global Vibrant Gujarat Summit here.

However, Parekh also expressed his concern that higher interest rates will adversely impact retail loans and housing.

"I personally feel that interest rates are already high and it will impact the growth of retail loans and housing. So, I would like to see interest rates to remain the same and the government tackling food shortage in a different manner," said Parekh.

"We have seen that inflation numbers are so high, mainly food inflation at 18 percent. However, there are statements from the government that it will come down to 7 percent by March," he added.

India's food inflation has soared to over 18 percent, led by onions which are selling in most parts of the country at Rs.55-60 per kg.

Analysts and the industry widely expect the central bank to raise key interest rates in order to tame inflation - a move which could have an adverse impact on industrial output that slowed down to an 18-month low in November.

The index for industrial production (IIP) nudged upwards by a meagre 2.7 percent in November, losing close to 9 percentage points from the 11.3 percent growth it logged in the like month of 2009.

Concluded.

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